Motorola Solutions, Inc. (MSI) Q3 2011 Earnings Report, Transcript and Summary

Shep Dunlap - Mark F. Moon - Senior Vice President of Sales & Field Operations Gregory Q. Brown - Chairman, Chief Executive officer, President and Chairman of Executive Committee Edward J. Fitzpatrick - Chief Financial Officer and Senior Vice President

Matthew Thornton - Avian Securities, LLC, Research Division Peter Misek - Jefferies & Company, Inc., Research Division Avi Silver - Credit Agricole Securities (USA) Inc., Research Division Drew Pierson - JP Morgan Chase & Co, Research Division Ehud Gelblum - Morgan Stanley, Research Division Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division Deepak Sitaraman - Crédit Suisse AG, Research Division Jim Suva - Citigroup Inc, Research Division Jeffrey Fidacaro - Susquehanna Financial Group, LLLP, Research Division Jeffrey T. Kvaal - Barclays Capital, Research Division Lawrence M. Harris - CL King & Associates, Inc. Craig Hettenbach - Goldman Sachs Group Inc., Research Division Pierre Ferragu - Sanford C. Bernstein & Co., LLC., Research Division

Good morning, and thank you for holding. Welcome to the Motorola Solutions Third Quarter 2011 Earnings Conference Call. Today's call is being recorded. If you have any objections please disconnect at this time. The presentation material and additional financial tables are currently posted on the Motorola Solutions Investor Relations website. In addition, a replay of this call will be available approximately 3 hours after the conclusion of this call over the Internet. The website address is www.motorolasolutions.com/investor. [Operator Instructions] I would now like to introduce Mr. Shep Dunlap, Vice President of Investor Relations. Mr. Dunlap, you may begin your conference.

Thank you, and good morning. Welcome to our conference call to present Motorola Solutions Third Quarter Results. With me this morning are Greg Brown, Chairman and Chief Executive Officer; Ed Fitzpatrick, Executive Vice President and CFO; and Mark Moon, Executive Vice President, Sales and Field Operations. Greg and Ed will review our third quarter results along with commentary, and Mark will join us for Q&A. I would like to point out that the results Greg and Ed will highlight in their prepared remarks refer to continued operations and exclude our point-to-point Orthogon and point-to-multipoint Canopy business units, which are now included in discontinued operations as a result of our previously announced sale of these business units during Q3. We have posted an accompanying earnings presentation and press release at motorolasolutions.com/investor. In addition, we have posted updated pro forma non-GAAP financials that reflect the recent move of Orthogon and Canopy to discontinued operations. I encourage you to review these materials. A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation. I would like to now turn the call over to Greg.

Thanks, Shep. Good morning, and thank you for joining us today. Motorola Solutions delivered a great third quarter, and our results were strong in almost every dimension that we measure. In fact, it was a record performance for a third quarter in sales, operating earnings and operating margin. Highlights for the quarter included growth in all regions, continued strength in Enterprise, better-than-expected Government growth, improved operating leverage and significant return of capital to our shareholders. This also marked another quarter of accomplishments that demonstrate our innovation and commitment to deliver the best mission-critical solutions to our public safety and enterprise customers. This morning, we reported sales in the third quarter of $2.1 billion, an increase of 10% from Q3 of last year. On a GAAP basis, net earnings were $0.45 per share from continuing operations, compared to a $0.04 loss in the year-ago quarter. Non-GAAP net earnings from continuing ops were $0.65 per share compared to $0.54 per share in Q3 of last year, a 20% increase. Our Government business revenues increased 9% as we saw growth across all regions, especially within Asia and Latin America, as customers continued to deploy our public safety solutions. Non-GAAP operating earnings in the Government business grew 27% due to the strength in sales and continued expense management. In our Enterprise business, sales increased 13% from the year-ago quarter as companies continued to deploy our products and solutions further into their organizations to improve productivity, operational excellence and improve the customer experience. Last quarter, we emphasized the priority we placed on capital return. During the quarter, we returned $744 million in cash to shareholders through share repurchases and, earlier this month, made our initial dividend payment of $0.22 per share. I'll now turn the call over to Ed to discuss our financial results, then return to discuss operational highlights and provide additional thoughts on our business performance.

Thanks, Greg. As Greg mentioned, our Q3 sales reflected across-the-board strength in all regions. Along with strong revenue growth, we had great profitability and operating margin performance while continuing appropriate level of investment in the business. Revenue growth continued in our Government business with third quarter sales of $1.4 billion, an increase of 9% from the prior year. Enterprise business delivered another excellent quarter as the segment grew 13% to $726 million, driven by strength in enterprise mobile computing and our wireless LAN portfolio. In addition to our sales performance, our total backlog in Q3 was up slightly from the prior quarter. On a GAAP basis, earnings from continuing operations net of taxes were $152 million, and EPS was $0.45 per share. Non-GAAP earnings from continuing operations were $0.65 per share compared to $0.54 a year ago. Operating expenses were $708 million, or 33.6% of revenue, which represents a 240 basis point improvement from the year-ago quarter. Operating expense dollars were roughly flat sequentially, in line with the outlook we provided in our last call. We expect Q4 operating expenses to be comparable to this past quarter. Operating earnings for the third quarter were $358 million or 17% of sales, compared to $289 million or 15.1% in Q3 2010. This 24% increase in operating earnings was driven by the 10% increase in sales combined with disciplined operating expense management. We are pleased with the leverage in our business as operating earnings increased over twice the rate of revenue growth during the fourth quarter. Total other income and expense was a net expense of $16 million in the quarter, compared to a net expense of $18 million in Q3 2010. This quarter's results benefited from higher-than-expected investment gains. However, we continue to expect this other income expense line to be a…

Thanks, Ed. In the Government business, our sales for the quarter were $1.4 billion, up 9% over Q3 2010, growth was solid in all regions and particularly strong in Asia and Latin America. Profitability for the segment also improved, with operating earnings representing 16.2% of sales this quarter compared to 13.8% in Q3 of last year. This increase in operating earnings was driven by our ability to grow revenues faster than operating costs. This quarter marks the seventh consecutive quarter year-over-year growth -- or year-over-year growth in our Government business, which demonstrates the priority that mission-critical communications spending receives among the federal and state and local governments. In the U.S., state tax revenues have increased for 6 consecutive quarters. The recent National League of City fiscal condition survey showed that municipalities are better able to meet financial needs in 2011 and in the prior 2 years, with public safety being one of the least likely areas to be impacted due to budget constraints. In August, we participated in APCO International's 77th Annual Conference and demonstrated our leadership in both the standards process and interoperability for first responders. During the show, we announced several exciting new products, including shipment of our latest version of ASTRO as the industry's first commercially available P25 system with Phase II TDMA, a technology which doubles the voice capacity of P25 Phase I for more efficient use of spectrum. We already have 18 customers signed up for this release. And during the quarter, we shipped the $14 million project for Washington D.C. and added a contract with the city of Cleveland for $38 million. To complement our award-winning APX 7000 radio, we released the first remote speaker microphone designed for firefighters. Another example of innovation that produces life-saving technology for firefighters around the world is Speaker…

Thanks, Greg. Before we begin taking questions, we want to remind callers to limit themselves to one question and one follow-up so that we can accommodate as many participants as possible. Operator, please instruct our callers on how to ask a question.

[Operator Instructions] We'll take our first question from the side of Craig Hettenbach with Goldman Sachs.

Greg, you mentioned solid growth across all regions. Can you dig in a little bit to the Enterprise? Good growth there as well, but just with some of the recent macro concerns there, any change in order patterns or tone of customers that you're seeing? And anything to call out by specific region?

Craig, no, we had -- as I mentioned, we had 13% year-over-year growth in the quarter. We had double-digit growth in both mobile computing and WLAN. I just think that there continues to be demand for mobile computing overall. And as more and more workers mobilize, those are favorable trends to us. I think stepping back -- also, by the way, all in for both Enterprise and Government, we saw backlog up slightly sequentially as well, which we felt was a good sign. So I think that we continue to perform in our key verticals. But at the end of the day, Craig, the whole emphasis on ROI and enterprises to get their cost structure down while simultaneously trying to drive revenue, increase performance at customer point of contact are trends that are favorable to us.

Great. And then if I could follow up with Ed. Good performance on the OpEx this quarter, and you got it flat next quarter. Can you just update in terms of the course you identified at the time of the spinoff where you are and any additional measures you might look to take as you go into next year?

I think as we updated on the last quarter call, we felt confident that we had executed to the cost reduction initiatives to take out the overhang-related costs that we had called out pretty early beginning last year, so I think we feel pretty good that those actions have been taken. The cost structure is aligned and the main reason why you're seeing us now kind of relatively flat quarter-to-quarter and guiding to relatively flat expenses for the fourth quarter. I think as we go forward into 2012, we'll come back to you with specific guidance. But you should expect us to continue to leverage the P&L going forward, whereas cost structure will not grow to the extent of the sales growth that we'll expect the next year.

We'll take our next question from the side of Deepak Sitaraman with Credit Suisse. Deepak Sitaraman - Crédit Suisse AG, Research Division: Greg, in the past, you've talked about long-term margins of the business being in the 16% to 18% range. This year, you're already on track to do about 16.5%. Can you talk us through some of the drivers of margin from here? I guess, just beyond revenue mix and operating leverage, what are some of the puts and takes we should be thinking about?

I think that the levers on continued operating expansion, of course, start with revenue growth, because we have gotten the cost structure further and further improved, which is why you see the kind of operating leverage that you do this past quarter with OE, or operating earnings, growing 2x the top line. I do think there's always opportunities to become more efficient as well, as we have successfully spun off mobility 10 months ago in a lot of the support services. We're always evaluating our shared services, our engineering footprint, our manufacturing capacity. So we're looking at a lot of different things to ensure that we are as effective and efficient as we can be while still investing about $1 billion of R&D. So I think there's shared services, real estate footprint, obviously revenue growth and as we continue to be more efficient in the cost of goods side with the consolidation of suppliers, I think there's a number of different things that can help us continue to drive operating margin expansion over time. Deepak Sitaraman - Crédit Suisse AG, Research Division: Okay, then as my follow-up, as you grow your services business, how should we think about the impact of that on margins? Is that a drag to margins? Or is it sort of a net neutral?

Well, I mean different product lines will have different gross margin profiles. And it is -- you're right, it is certainly likely that a lot of our services business will not have the gross margins that we enjoy in other segments. Having said that, Deepak, we are not confused and, all in, will continue to manage the whole portfolio, and our goal will be to continue to drive operating margin expansion and, of course, increase operating and free cash flow as well. And so we'll manage that mix.

And just to add to that, I'd say that as you look at our services business, gross margins may be a bit lower, as we've disclosed, but operating margins are not that different. So we don't expect the services business as it grows to be a drag on the operating earnings growth that we've been talking about.

We'll go next to the side of Pierre Ferragu with Bernstein. Pierre Ferragu - Sanford C. Bernstein & Co., LLC., Research Division: I have a question on your acquisition and divestment activities in the quarter. Can you tell us how you look at this at the moment? How is the divestment of Canopy and Orthogon have -- how you've been thinking through that, and also the acquisition of Rhomobile? And going forward, is there any particular area in your portfolio where -- or in your geographic exposure where you feel you don't have the right exposure and you would see some further M&A activity?

So on the divestiture of what we call our wireless broadband business, our point-to-point and point-to-multipoint, the fact of the matter is it just wasn't strategic to us. It was about -- it is about $170 million of annualized revenue and was struggling from a profitability standpoint. And we were -- we had a very, very small percentage of market share, and we competed with the big boys, who are more sophisticated and have a more robust product line for backhaul. Folks like Ericsson and Alcatel-Lucent, NEC, so it just didn't make sense. And it wasn't core to mission-critical communications. And as we configure our own designs and solutions for customers, sometimes we didn't even use our own product, and that should be also a clue in terms of its lack of strategic value. So it wasn't financially accretive nor was it consistent with what we talked about, about mission-critical communications. Shifting to Rhomobile, we acquired that small software company because with HTML5, it will lessen the dependence on people writing applications for one operating system or another. So today, people write for WIN mobile 7.5 or they write for Android 2.3 or they write for Windows-embedded handheld or they write for BlackBerry OS. And over time, this will be all abstracted, and you'll have one set of developers writing to a standard base, what I would call API, to HTML5. So it really is designed to expand the applications portfolio for developers and to our Government and Enterprise customers and allow us the latitude of offering devices that may have either Microsoft or Android, but do it in a way that attracts the ecosystem and developer community and provides ultimately our customers with the choices that they want. So that's -- that was the philosophy behind Rhomobile, which was an affordable all-cash-in tuck-in that we think was fundamentally key to our mobile computing business.

Overall portfolio.

And on the overall portfolio, as we think about our current product portfolio, we do not see a gap that we would identify today based on the franchises where we play and the platforms where we lead. So we don't step back and say, "Boy, we really need to fill in X or Y." That said, we'll always be opportunistic in looking at opportunities that come forward. But I think we have a very strong set of products and solutions at this point in time. Pierre Ferragu - Sanford C. Bernstein & Co., LLC., Research Division: And in terms of geography, you feel also you're well exposed to all international markets you want to be exposed to? You don't see any gap there either?

No, I don't. I think with 25,000 -- 1,700 feet on the street worldwide and 25,000 channel partners, we will always use distributors, VARs, independent software vendors and the mix of alternate distribution channels for us to reach and touch kind of all corners of the world. So I think as we continue to monitor and manage that mix, I think we'll be able to manage accordingly.

Look, Pierre, as you talked about, we will continue to look for opportunities. If there's ways for us to strengthen our presence in a particular region, that will definitely be a factor for looking to inorganically grow in a region where we might feel we can do better by going outside and acquiring.

We'll move next to the side of Ehud Gelblum with Morgan Stanley.

First, Greg, did you give the size of the businesses that you divested? This quarter, I know you talked about $165 million to $170 million annually, but I'm not sure if I missed the actual number this quarter. And given that it is generating losses, I'm assuming you didn't get that much cash for it, so I just wondered if you have that number in terms of what you received for it. I would love that. And my main question is on the Enterprise side. It continues to kind of be on a roll. Is wireless LAN a big play in the -- obviously, it did well, but can you give us some sense as to how well wireless LAN did and how large -- is that a growing piece of the business? Or is the entire business growing that same 13%? And equally, if you look at RFID, you didn't mention it this quarter, and it kind of comes and goes in conference calls in the past. Was that a growth piece of it? I'm just trying to get a sense as to what are the main drivers that have continued to keep Enterprise as strong, maybe from a product perspective, whether it's wireless LAN or whether it's the direction of the new scanners, or just trying to get a good sense of what really is driving Enterprise, and any way you can kind of break it apart into smaller pieces would be great.

So what's driving Enterprise primarily, I would say the twin towers of growth are mobile computing and WLAN. Now, Ehud, that said, our advanced data capture business, while not very glamorous, is strong and steady, and it has density and materiality, so that continues to be a positive contributor as well. The divested businesses are $170 million annualized in Q3. They were about $40 million or $41 million, to dimensionalize what Canopy and Orthogon are in the Q3 results. By the way, we haven't closed that transaction yet, although we expect to do that shortly. WLAN is growing much faster than the 13% Enterprise rate overall. I think the industry is growing strong, but between our performance in the verticals, utilizing air defense -- and, by the way, we're positioning WLAN more kind of in the kernel of our services offering as well, reference Sears. So I think that -- and also because cellular networks, as you know, continue to strain under the explosion of data and video traffic. From a carrier standpoint, WLAN is very well-positioned, and you know what came out of the acquisition of the Symbol organization. RFID is -- we're still bullish on it and think that it will have significant opportunities going forward. I think it wasn't simply mentioned because it was a bit lumpy and there wasn't a significant reference or contract to mention in Q3, but that doesn't change our perspective that we think it's fundamentally key going forward.

Great. If I could have a follow-up, actually, there's just an earthquake in San Francisco, so you might actually get some more business out of that depending how the first responders have to take care of that.

Wow, I didn't know that.

It literally just happened. But can you walk us through a little bit what's happening, just completely switching gears on the Government side, with Los Angeles and the LA-RICS project and kind of the puts and takes that happened over the last 6 months and kind of where you stand with that and how you see your odds are when they actually will choose a vendor for that and how you think you stack up?

Well, LA-RICS put out a bid, as you know, and we competed for that bid. It came under review and ultimately was determined to be pulled back and rebid. We led with, of course, our solution along with Verizon, which is our anchor tenant partner on public safety LTE. Ehud, interestingly, the new bid has not been let yet. So we're very eager and prepared to respond. And whenever it comes out, whether it's later this month or, I guess, more likely looking like November, we'll be anxious to compete on it. I don't know, Mark, if you want to say anything more?

No, I think you covered it very well, Greg. We expect the current -- the reissued, if you will, RFP to be done later this month. And we expect there to be competition, as we would normally expect in a bid of this size in North America. And obviously, the entities, both L.A. City, the independent cities in the county and the county, are strong customers of ours, so we intend to compete very hard for this business.

We move next to the side of Tavis McCourt with Morgan Keegan. Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division: The backlog you stated, Greg, I think you first said it was Government, then you said it was combined Government and Enterprise. Can you just drill down into the Government and kind of what's happening with that backlog? I think, last quarter, you said it's been relatively flattish. Did that change materially?

So backlog in aggregate is up slightly. So we don't talk about the individual segments of Government or Enterprise. So what I was describing was that overall backlog is up, which, quite frankly, we were pleased with, given the 10% earnings growth in Q3. I think it just reinforces what we have been saying about the mission-critical nature of public safety, and there's a lot of different drivers that continue to, both domestically and internationally, expand our position in this key segment.

Specifically to your question, that slight growth in backlog was driven by the Government segment. Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division: Great. And when you have a quarter like this where, obviously, Government exceeded, I think, probably most of our expectations and probably yours as well, is that typically because the turns business within Government got better, or because you were able to basically recognize more of the backlog revenue than you would have thought 3 months ago?

Yes, I think, it was actually a combination of a lot of things. But as you said, it was better than we even expected, because we were being a little cautious in some of the regions, given the headwinds that we were all facing. As a result, we were able to turn backlog. But we grew backlog, as you said. So new orders were also very, very strong. So I think the exciting thing about that, for us, in the Government space is that there was growth in every region, including EMEA, which we talked about previously as not showing growth, and North America continues to be very resilient and show very strong growth. So it was really a combination of all things coming together, as you said, in a better and possibly better-than-expected effort.

And our next question from the side of Larry Harris with CL King. Lawrence M. Harris - CL King & Associates, Inc.: I have a couple of questions related to LTE. I think you've indicated that your first release of LTE equipment will be available on November 11. I assume that you'll be shipping at that time or thereafter. When can we begin to see significant revenues related to LTE? And do you think it'll be greater initially, maybe in international markets like the Middle East or Brazil than the United States?

So I think, as you said, we're excited about the initial release coming out the middle of next month, and we will begin shipping to customers at that time. As we've always alluded, really from a revenue-recognition perspective, we will see revenue in 2012, but we don't expect it to really become, as you said, in a significant kind of fashion or in a meaningful fashion until 2013. We expect initial revenues to be in North America, actually, but we're excited about the large opportunities in the Middle East and in Latin America and also in Asia. So I do think the LTE, we always said that it would begin in North America because of the good work that's been going on with the PSST and the D Block spectrum that's still being discussed, but it will move internationally as it goes forward. Lawrence M. Harris - CL King & Associates, Inc.: It's really from a revenue point of view post 2012 in terms of significance.

That's correct.

We move next to the side of Avi Silver with CLSA. Avi Silver - Credit Agricole Securities (USA) Inc., Research Division: I wanted to ask just about -- can you talk a little bit about iDEN revenue in the quarter, the outlook there? And how do Sprint's plans alter your outlook, if at all, for the next couple of years?

I think, as we guided for Q4, if that's what you're talking about, we had planned for that iDEN revenue to decline in the fourth quarter, marginally in line with what we're seeing now with the outlook that we saw in the beginning of the year. So the iDEN decline overall for the year is a bit less than we expected and planned at the beginning of the year. And I'd say going forward, given that a lot of the revenue that we have today is related to services in support of the networks, we will see that business decline in '12 and '13, but we expect the decline to be relatively consistent with this year and/or trail in the subsequent years. Avi Silver - Credit Agricole Securities (USA) Inc., Research Division: Okay, got it. And the other thing I wanted to ask about it is the MC17, which seems to be a really interesting product and has some, I think you called out Europe last quarter. Just curious how that's doing in Asia and the U.S. and what are you seeing in terms of update -- of uptake. And how big is this today as a percentage of the Enterprise revenue? And how could -- how big could this become going forward with broader adoption?

So as we've indicated, and as you indicated, the MC17 has had the strongest success in Europe, and it continues to do so. But it is within customer deployments in all regions. We have a number of customers leveraging in the U.S. and some in Asia, and we continue to look at, as we've previously talked about, what is the right product or variation of this product as we think about markets like Asia and Latin America. So we're excited about this project -- product, but, again, we're excited about our entire mobile computing portfolio. So I think we continue to innovate and we continue to see good uptake throughout the world.

And our next question from the side of Steve Tusa [ph] with JPMorgan. Drew Pierson - JP Morgan Chase & Co, Research Division: It's Drew Pierson in for Steve this morning. Color on the 4Q guidance, did you guys talk about kind of expectations by segment, which segment might be directionally above or below that 2% to 3% for the 4Q?

We've not talked by segment the growth. We've just given the aggregate number for the quarter, that's the 2% to 3%. And backing up the impact of iDEN, approximately 5% growth. But we do expect to see growth in both businesses. We'll give you that level of color. I'll let Mark -- pass it to Mark for more color.

Yes, I think Ed reiterated earlier this is in line with the guidance we gave previously and what our expectations were. So excluding iDEN business, if we think about the original guidance that we've always given around Government segment performing in the low to mid-single-digits and the Enterprise business performing in the mid- to upper single-digits, that's really the expectation that we see and how the buildup of that 2% to 3%. Then the iDEN decline is what brings it back to those kind of levels. So again, the earlier question about the strength of Enterprise and how we see it continuing, it's still, even in the fourth quarter, coming off of a strong comparable operating at normal rates.

That's right, Drew. And if you look at last year, about 14% growth in Q4 of last year, that's what we were referring to. Drew Pierson - JP Morgan Chase & Co, Research Division: Sure. Okay, that's helpful detail. I appreciate it. And then it looks like your 16.5% margin guidance is unchanged. You've divested what looks to be a money-losing business. You've -- maybe a little more iDEN in there, which is accretive to the margins. Is there any reason that's unchanged, or is it just kind of the moving pieces aren't enough to move the margin guidance higher?

I really think it's the latter, a bit higher expenses on the higher sales and just mix of product. Just that I'll call out as well the impact of the business that was divested was actually -- profits was actually about $0.02 per share, which is effectively offset by the impact of the share repurchase that was a favorable $0.02 per share, so...

We'll go next to the side of Jeff Kvaal with Barclays Capital.

I have a question and a clarification. I think first on the clarification, just to be clear, the fourth quarter guidance that you are giving, is that the basis excluding the Canopy business?

That's correct, continuing operations.

That's going to help the numbers. Works a little bit better than they have been in the model. And then, Greg, for you, I was wondering could you talk to us a little bit about what the market and competitive position looks like for you in the Government business outside the U.S.? That seems to be a bit of a theme for you over the course of the last few quarters. If you could spend a little bit more time going into that and what are your share opportunities are, that would be super.

I think we're very well-positioned internationally. As we talked about, we grew double-digits outside of North America in all 3 regions. I think it's a combination of our -- to an earlier point on this call, the reach and capacity of 25,000 indirect channels, which largely drive the Enterprise business, and our embedded and incumbent position and strong sales force in different theaters on the Government side. Overall, too, I think that there's just a variety of different demand drivers in different parts of the world. And as Mark Moon mentioned earlier, in the LTE environment, the U.S, interestingly, North America, will lead it first, with the Middle East following shortly thereafter. So when we talk about the public safety LTE business, which is incremental to the business that we have at the moment, it will largely be led first in the U.S, then the Middle East. And over time, it will take Europe and Latin America to get their spectrum position in place, but those are areas that will provide even further growth opportunities. So I think we're in a good position, but we can always do better, and we'll always do more.

Can you talk a little bit about what your shares are relative to where they are in the U.S. and then which of it -- the competitive landscape?

Yes, we don't get into product market share per platform, but it's fair to say -- well, first of all, we lead in TETRA worldwide. But we don't have the kind of market share in TETRA that we have in P25. In mobile computing, our leading market share position is a little bit more consistent in North America as compared to other international theaters, but we don't dimensionalize it beyond the aggregate.

Moving next to the side of Jeff Fidacaro with Susquehanna.

I was wondering if we can just get a little bit more color on the outlook on the Government side, particularly where budgets kind of stand, your visibility at this point in time and any change into the -- in the sales cycles. And ultimately, could we see this government piece sort of uptick in revenue growth in 2012 versus '11?

Yes, so I think Greg's talked on a number of occasions about the -- the good thing about the Government business is we have relatively good visibility. Many of these deals are long-term kind of acquisitions, and you do get deals that build backlog, so we continue to have good visibility. As I mentioned previously, our orders in the quarter for Government segment were up, so we continued to see good performance in that particular piece. So all in all, as we look forward, we certainly are keeping our eyes open to the economic situations around the world, but we continue to feel that the current visibility is similar to what we've seen in the past, and we really don't see any structural changes to our view of the Government business as we look into 2012.

And when you take kind of a step back, all-in, because the guidance is important, remember, number one, the wireless broadband business is out -- is pulled out in Q4. Secondly, our 2% to 3% top line, which incorporates that, also kind of maps to more approximately 5% growth if you extract iDEN. We're coming off a 14% year-over-year comp from Q4 of last year, and backlog is up slightly. So as you take things in composite, that should give you a full flavor of how we're doing. And recall also that we've raised full year outlook to approximately 7%, all in, for this year in 2011. So those are the puts and takes and why we feel reasonably good about where our current position is.

Okay. If I could just have one quick follow-up, just if you give some color of a breakdown between international visibility versus U.S.

I think it's relatively similar. I mean, if we look at percentage of backlog versus revenue, it's not dissimilar in North America versus the international markets. So again, while the portfolio may be somewhat different and sometimes the buying cycles are different, they've been pretty consistent and still remain fairly consistent in the position of backlog versus quick-term business versus new orders that we need to convert.

To the side of Peter Misek with Jefferies. [Operator instructions] Peter Misek - Jefferies & Company, Inc., Research Division: As we go forward for LTE and for other network deployments, should we think that working capital usage is going to go up or down? We had good free cash flow this quarter, so kind of love to get your puts and takes on free cash flow for next year.

Yes, I think as we look forward, some of that still remains to be seen as the deployments are really just getting started. But I would say I wouldn't see any appreciable change in the way that we're managing the working capital levels and the related cash flow impacts. Peter Misek - Jefferies & Company, Inc., Research Division: So we don't think -- you don't think we need a bigger investment as we see the growth accelerate, and we should be modeling similar working capital trends that we saw this quarter?

I think for now that's what I would assume. As we get into these, we will give you updates if we think that it's either more or less capital-intensive. As I look at it, as there are build-outs, it's possible there could be a bit more capital required to roll some of these things out. But we're not seeing that just yet, so we'll update you as appropriate going forward.

We'll go next to the site of Matt Thornton with Avian Securities.

Most of my questions have answered, but maybe a couple, like, general ones. I guess, Greg, just on a competitive landscape, can you talk a little bit about any change that you've seen in behavior in pricing, new entrants, new aggressors? And then secondly, more of a housekeeping question, can you give us a quick breakdown as to where we stand regionally in the Government business and the Enterprise business? Again, just a rough estimate about the revenue mix by business.

In answer to the first question, no meaningful changes on the competitive landscape. And you know, we consistently compete with in public safety North America on the systems side. It's usually Harris. Occasionally we'll compete against a systems integrator in North America as well. On the professional and commercial radio business, where we continue to lead worldwide and have performed extremely well from a share perspective and a financial perspective, no significant changes. WLAN, same thing. Whether it's Cisco or Aruba, I don't think there's any material changes, so we continue to move forward. And as a result of that, we also don't see, at this point, any significant swings or changes in competitive pricing as well. Now obviously, bids are always competitive, and when you get to these large tenders, price is very, very important. But I wouldn't say -- I'd say that's been very consistent over the last few years for us as we compete with large deals, and that says we have to come up with the best product solution with the highest quality and continually drive costs out of this business, so we remain competitive and win. And that's our intention to do it. I think on the growth by region color, I think -- as we mentioned, growth at every business -- in both businesses, I should say, Government and Enterprise, and then growth in every region in every business for the quarter, which I think is positive, I guess a little more color we could tell you, a bit more robust growth outside of North America across the board and the Government business in EMEA now coming to a point where we're talking about growth, a bit more modest, but getting back to growth, as Mark had mentioned. So that's the color we'll provide there.

And we'll take our final question from the side of Jim Suva with Citi.

When we look kind of long term about the LTE announcements and opportunity there, is it fair to say that these products and service offerings there are comparable to your existing product profitabilities? Or is there additional complexity added into the LTE initiatives that actually allow you to take your profitability up onto a little bit of a higher profitable level? And then I probably have a follow-up.

So I think the way to think about it, Jim, is, and this was referenced a few different times, we have to continue to grow this business on top line. We're well-positioned from an operating leverage standpoint, which means it would be our goal to continue to drive operating margin expansion, and somebody mentioned the 16% to 18% framework that we have talked about and we talked about as part of our model, and there's no reason that we can't see at this point why we shouldn't be able to continue to expand operating margins. But we also recognize that there'll be a different mix of products and services. But we believe we should be able to manage that mix, all in, and therefore drive improve operating cash flow and free cash flow as well as continue to increase and drive earnings per share and operating earnings. And that's how we are approaching this moving forward. Now all in, we still believe that, organically, our long-term growth model for this business is 5% to 8%. And obviously, you've seen us do that throughout this year, year-to-date. Again, for the full year of '11, we think we'll be able to grow the firm approximately 7%. And we'll give you color in 2012 about that year in the January earnings call. But the demand drivers are very strong. We believe in the long-term model, and we should be able to continue to grow earnings and cash. And that's our intention as a management team.

Follow-up is for your calendar Q4 outlook, am I correct that assumes the debt retirement already built into that? And then what would be the share count base that we should use? It's a little difficult to know the linearity of the stock buyback.

So we will retire the $600 million of debt on November 1. I think coming out of Q3, the diluted share count is 339 million. We wouldn't forecast a share count going forward, given the puts and takes, but it was 339 million coming out of Q3. And again, given the share repurchase of $744 million, we bought back 5% of the market cap of the firm at a price of $40.38. So we'll continue to look at all those things carefully.

And the guidance we gave you for Q4 assume the Q3 ending, so just to make sure you know we're consistent.

I'll turn the floor back over to Mr. Shep Dunlap, Vice President of Investor Relations, for any additional or closing remarks.

Okay. I would like to remind everyone the details outlining highlighted items, our GAAP to non-GAAP P&L reconciliations and other financial information can be found on our motorolasolutions.com Investor Relations site. An audio replay together with a copy of today's slides will also be available on this site shortly after the conclusion of this call. During this call, we made a number of forward-looking statements with the meaning of applicable federal securities laws. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent dates. Such forward-looking statements include, but are not limited to, our comments and answers relating to the following topics: future sales growth, including segment region; earnings per share guidance; future tax rates and cash tax rates; expectations for operating expenses; operating earnings; the amount of other income and expense as well as operating margins and profitability; expected cash generation and needs for working capital; expected improvements in operating leverage; demand trends from Motorola Solutions businesses and products, including wireless LAN, RFID, LTE and our MC17 device; our expected decline in iDEN and the timing and ability to repurchase shares under the share repurchases program; or our ability to pay future dividends; along with the competitive landscape, including pricing. Thanks, and we look forward to speaking with all of you again shortly.

Ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the Internet in approximately 3 hours. The website address is www.motorolasolutions.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time. Have a wonderful day.