July 25, 2012 / 5:12 PM / 5 years ago

UPDATE 2-Motorola Solutions sees govt sales offset weak enterprise

* Sees Q3 rev growth of 3 pct

* Q2 adj EPS from cont ops $0.70 vs est $0.69

* Q2 rev rose 8 pct to $2.14 bln vs est $2.11 bln

* Shares rise 5 pct (Adds background, CEO comments, conference call details, share movement)

July 25 (Reuters) - Motorola Solutions Inc’s quarterly revenue beat analysts’ estimates on strong demand at its government business, but the communications-gear maker said it expects its enterprise business in Europe to remain under pressure for the rest of the year.

The company, which dominates the two-way radio market with its land-mobile-radio systems and public-safety products, has been experiencing strong demand from governments over the past few quarters, and has entered into large contracts such as one with Norway in the first quarter.

CEO Greg Brown told Reuters that the government business was helped by customer upgrades to comply with new regulations.

Users of two-way radios need to upgrade their devices to switch to a more efficient spectrum, according to a Federal Communications Commission (FCC) mandate.

The mandate requires all licensees to convert their existing wideband channels of 25 kHz to narrow bands of 12.5 kHz by January 1, 2013 to allow additional capacity within the same radio spectrum and support more users.

Brown said 3 percent of the 14 percent revenue growth in the second quarter came from narrowbanding.

The company is also upbeat about the roll out of devices that use the new 4G LTE networks, but Brown said he doesn’t expect meaningful revenue from this segment until the second half of 2013.

Motorola Solutions competes with some businesses of Cisco Systems Inc and European Aeronautic Defence and Space Co.

WEAK EUROPE

Brown said the company’s government business in Europe was doing well despite the economic crisis in the region, but expects enterprise sales in the region to remain weak.

“Europe will remain under pressure clearly for the balance of the year,” Brown said.

Europe accounts for 20 percent of the company’s total sales.

The company’s order backlog -- the value of orders signed but not completed and paid for -- fell roughly 2 percent at the end of the second quarter from three months earlier.

For the current quarter, the company expects a revenue growth of 3 percent, translating to sales of $2.15 billion and missing analysts’ expectations of $2.20 billion, according to Thomson Reuters I/B/E/S.

Motorola Inc, faced with steep declines in the sales of its mobile phones, spun off its consumer-oriented, phone and set-top box business into Motorola Mobility Holdings Inc last year.

The parent company, which was renamed Motorola Solutions, retained the government and enterprise businesses. Its stock price has risen by about 27 percent since the split, including Wednesday’s gains.

Second-quarter revenue from the company’s enterprise business, which makes wireless broadband products, security products and mobile computing devices, fell 2 percent in the quarter. The division accounted for about 35 percent of Motorola Solutions’ total sales in 2011.

Net earnings fell to $182 million, or 61 cents per share, in the second quarter from $349 million, or $1.00 per share, a year earlier. It earned 60 cents from continuing operations, compared with 14 cents in the year-ago period.

Excluding one-time items, the company earned 70 cents from continuing operations.

Revenue rose 8 percent to $2.14 billion.

Analysts had expected earnings of 69 cents per share on revenue of $2.11 billion.

Shares of the company rose to $47.74 on the New York Stock Exchange. (Reporting by Chandni Doulatramani in Bangalore and Sayantani Ghosh; Editing by Supriya Kurane, Sreejiraj Eluvangal)

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