Good morning, and welcome to the Zebra Technologies’ 2013 First Quarter Earnings Release Conference Call. Joining us from Zebra Technologies are Anders Gustafsson, CEO; Mike Smiley, CFO; Mike Terzich, Senior Vice President, Global Sales and Marketing and Doug Fox, Vice President, Investor Relations. All lines will be in a listen-only mode until after today’s presentation. Instructions will be given at that time in order to ask a question. At the request of Zebra Technologies, this conference call is being recorded. Should anyone have any objections, please disconnect at this time. At this time, I would like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin.

Thank you and good morning everyone. Thank you for joining us today. Certain statements made on this call will relate to future events or circumstances and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Words such as expect, believe, and anticipate are a few examples of words identifying a forward-looking statement. Forward-looking information is subject to various risks and uncertainties, which could significantly affect expected results. Risk factors were noted in the news release issued this morning and are also described in Zebra’s 10-K for the year ended December 31, 2012, which is on file with the SEC. Now, let me turn the call over to Anders Gustafsson for some brief opening remarks.

Thank you, Doug, and good morning everyone. Today, Zebra reported first quarter sales of $237 million and earnings of $0.46 per share including $0.04 per share in exit and restructuring costs and acquisition expenses. While results fell short of our expectations and our guidance range for the quarter, which is seasonally the slowest period of the year for Zebra. We executed well on our strategy and advanced our industry leadership position. We entered the second quarter encouraged by a much improved pace of business and a growing pipeline of revenue opportunities. We expect this favorable environment to translate into a sequential increase of $9 million to $21 million in second quarter sales. In addition, important opportunities to expand our business in the second half of the year are developing. These opportunities span the range of Zebra products, including thermal printers, supplies and service, as well as new growth platforms such as mobile point of sales, or POS and location solutions. After several periods of solid performance in North America, the first quarter experienced soft run-rate business in the first half of the quarter and slow large deal activity with key retailers. Consequently, some of our distribution channel partners made conservative decisions to aggressively reduce inventories. While the second half of the quarter was much improved, the pickup was not enough to fully overcome the slower start to the year. Our performance in EMEA, Asia-Pacific and Latin America was largely within expectations. Although business conditions in EMEA remain challenged, all of our international regions experienced a steady run-rate business indicating continued investment in asset visibility solutions by local customers. Overall, our geographic diversity continued to benefit Zebra through an uncertain business climate as ongoing strength in several countries helped to offset weakness in others. We remain optimistic about Zebra’s opportunities for…

Thank you, Anders. Let me highlight some of the key components of Zebra’s results for the first quarter. My comments will principally focus on year-over-year changes in the performance of Zebra’s operations. First, anticipated sales decline in Europe and Asia-Pacific were partially offset by sales growth, our North America and Latin America regions. Second, gross margin was most affected by product mix and sales volumes. And third, operating expenses increased from higher wages and other employee related expenses as well as exit and restructuring costs. Let’s take a look at sales. For the quarter, sales declined 2.8% from $243.9 million last year to $236.9 million this year. The impact of foreign exchange, net of hedges, was not material. In EMEA, sales declined 10% from peak sales a year ago as expected primarily the result of weak economic conditions in the region. Sales for North America increased 1%. From a product point of view, printer and other hardware sales were down in the region. Supply sales, which include labels, wrist bands and ribbons, remained on a strong year-over-year upward trend. As mentioned earlier, weak sales in the first half of the year triggered inventory reductions by our distributions accounting for most of our difference. In Asia-Pacific, sales were down 1% from a year ago. Manufacturing in Asia-Pacific was affected by economic weakness in Europe, again consistent with our expectations. Latin American sales advanced 4%, benefiting from our geographic diversification and improved manufacturing environment in Mexico. By product category, hardware sales declined 8%, which was partially offset by 14% growth and supplies. While a portion of the supplies growth was due to the LaserBand acquisition, sales of thermal-based supplies were also up. On a year-over-year basis, average printer unit prices declined from $503 to $469 principally because of mix. Product mix and…

Thank you, Mike. Although, the first quarter was challenging, we remained confident in the second quarter and beyond. Near-term, we are experiencing a growing pipeline and the current phase of business should translate into sequential growth in all geographic regions. By consistently following a well-defined strategy, we have continued to extend our industry leadership. Our business execution, financial strength, and innovation have resulted in stronger relationships with more consumers worldwide. As we pursue our growth goals, we will continue to exercise effective control over operating expenses to drive greater efficiencies and direct resources to those areas that will deliver the highest returns in our investment. We will also execute stock buyback and pursue acquisitions for the benefit for our shareholders. Longer term, we are optimistic that meaningful returns on our investments in new incremental areas of growth will become increasingly evident as we progress through 2013. These areas build on the strength and brand of our core business. They also further move Zebra to new adjacencies which are expanding the total available market for Zebra’s products and solutions, such as mobile POS and cloud-based applications to our Link-OS operating system. RFID is another attractive area of growth as customers in a broad range of industries are recognizing the gains in visibility that solutions built around this technology can offer. This week at the RFID Journal Live industry conference, we highlighted two important customers, Vail Resorts and GEA Farm Technologies that are utilizing RFID in innovative ways to enhance the customer experience integrate with social media and increased the productivity and efficiency of operations. At the show, we also announced the planned introduction of our newest passive RFID printer encoder, the ZD500R. This compact desktop unit offers great performance in the small footprint and incorporates Link-OS for enhanced printer operation. We also recently released our Material Flow wireless replenishment starter kit. Utilizing active RFID technology, Material Flow provides a real time visibility on the plant floor, so manufacturers can respond quickly to changes in inventory, production status and customer requests. Material Flow can help to decrease on hand inventories, improve asset utilization and reduce labor costs. To conclude, we continued to have great confidence in our business and the strategy we are following to create shareholder value. Zebra together with our partners is working to build a smarter more connected global distance community. Increasingly the internet of things and other emerging technology trends are creating new incremental revenue opportunities for Zebra. We also remain optimistic about our core business where we are building stronger relationships with key strategic customers and enabling better penetration of established and new industries. Thank you for your attention today. We look forward to providing you with regular updates on our progress through 2013. I would now like to turn the call back to Doug for Q&A.

Thank you, Anders. Before we open the call to your questions, let me ask that you limit your questions to one question and one follow-up. In addition, Mike and I will be available after the call for any further discussions.

(Operator Instructions) Okay. And our first question comes from Stephen Stone. Please go ahead. Stephen Stone - Sidoti & Company: Good morning.

Good morning.

Good morning, Stephen. Stephen Stone - Sidoti & Company: Just I guess my first question here is, can you give us the expectations you have for mobile POS and RFID? Are these becoming more meaningful to kind of revenue and bottom line now?

Well, I shall start with RFID. We see continued steady progress on RFID generally. We’ve moved from a few years back primarily testing the technology with our customers to now we are testing the applications and the business case. So, most applications now are more niche oriented they are more closed loop oriented. But we see good traction particularly in retail, but also in other manufacturing segments around particularly around automotive. But it’s still a pretty small part of our business and it is somewhat lumpy as part of that, but we certainly see an upward trend and we have good great confidence that they will become a growing part of our business. Stephen Stone - Sidoti & Company: Okay.

And I guess I talked about mobile POS, so I guess I would frame that in maybe around more of our total investments we’ve made in growth areas over the last few years. We have a portfolio of investments that we are pursuing. And many of those are more focused on our the core part of our business so expanding into new geographic regions, increasing the cadence of new product introductions that I think has been working out very well over the last few years we feel very strongly that those have helped us to accelerate revenue and certainly accelerate share gain in the industry. But we also have some other investments that are a bit more into adjacencies than the core. Here we talk about some of the software activities we are doing. I guess RFID will be part of that and mobile point of sale is also part of that. And we feel that we are well on track with relative to our own plans for realizing good returns of these programs. But, they are more embryonic, you can say, in some respect, so it will take longer for them to come to fruition. But the pipeline around, as I say particularly mobile point of sales is very attractive. We have quite a few meaningful deals that we hope to be able to close in the second half of this year. Stephen Stone - Sidoti & Company: Okay. My other question here is, what is your outlook on the acquisitions kind of the pipeline and also the competitive market, how does that look?

Well, we are always looking for to invest in the opportunities with the highest risk adjusted returns. And we – our primary first goal for that, top priority is really to invest in organic growth. We think that has the – that is the highest risk adjusted return we can find. Next, we have buybacks and acquisitions, we are active. We are looking at a number of acquisition opportunities, but they must meet our financial criteria and also pass through our strategic hurdles, to make sure that they really do fit the business and are something they have to accelerate our ability to execute on our strategy or better enable us to execute on our strategy. Stephen Stone - Sidoti & Company: Okay, and if I could sneak just one more question, what is the percentage of sales from your largest customers?

This is Mike, still we list three customers. Our customer A is 16.6%, customer we call B is 12% and customer we call C is 11.9%. In comparison for 2012, a year ago if I look at customer A is 21.5%, customer B was 11% and customer C was 9.7%. Stephen Stone - Sidoti & Company: Okay, thank you.

Yep.

Your next question comes from Brian Drab. Please go ahead.

Good morning.

Good morning.

Good morning, Brian.

Good morning, just first question, can you talk a little bit more about what happened in North America and whether the weakness was weighted more toward manufacturing or retail or were you able to discern what end markets were most challenged?

So, North America we would say we had a slower start than we expected. The run rate is generally was somewhat weaker than we would have expected. And there was also pure large deal activity going on. I think as we entered Q1 globally, but particularly in North America I think the business community was quite hesitant to commit to spending money in Q2. I think it took longer for most businesses to hand out offering budgets to their business units. And that got us off to a slower start than we had expected. Retail had been a very strong vertical for us in 2012. It was a bit more of a mix bag in Q1, but we do expect retail to be a growth engine for us over the longer term divested this year. The retailers are particularly interested I think investing both in technology to help improve the operations, but also to help improve the shopping experience and built the brand as they have to compete against online retailers, so we have seen a lot of benefit from that. I think healthcare was the other market that we would probably highlight here. There was a bright spot for us. We almost doubled the revenues in healthcare and that was very much a result of the investments, we’ve made in building that vertical over the last 3 or 4 years. Mike anything to add from you.

Brian this is, excuse me this is Mike Terzich, let me add a little color on and tease apart a little bit what happened in North America from both the run rate and from our key retail business. On the run rate side, as you know over the past several quarters we’ve talked about one of the assets that we have as our large install base particularly in what we call the big iron heavy metal product. And we saw perhaps a little bit of the tail end of a pretty robust refresh rate that had been going on for most of 2012 carried into 2013 perhaps not at the level that we were expecting. On the key retail side, our business in retail quite a bit of that business is tied to our mobile devices, which are also tied to what is happening on the terminal side of the business. And as you know Microsoft is going through a revision of their mobile device operating platform. I think retailers in general that have terminals tied to a lot of those mobile devices are a little bit in a wait and see mode as that gets sorted out. And that’s been going on I think for a couple of quarters. I think if you look back historically, last couple of quarters have large opportunities in retail business as they are a little sluggish and that continues, but we do see some changes in the wind as it relates to the second quarter.

Okay, thanks for all of that good detail. And then just one modeling question here, I didn’t see in the press release your typical disclosure of how much impact FX had on the top line. I don’t know if you said ahead on the call, so can you talk about that and then also what you expect in the second quarter in terms of the top line impact from FX?

Yeah, good question, there is really no FX impact in the first quarter and we are not really expecting much of an impact in the second quarter at all.

Okay, thank you.

Okay, our next question comes from Mr. Michael Kemp. Please go ahead.

Hi, good morning everyone.

Good morning.

Good morning.

So, just turning back to North America, can you talk a little about the tone you are hearing from the distribution channel, given that they had aggressively brought down their channel inventories, are you seeing sort of that similar aggressive rebuild of the channel inventories, do they feel better about demand environment?

Yes, I think the Q1 was a bit unusual, generally for us here. The first month of the quarter is normally the slowest, but and we do about 50% of our business in the last month of the quarter. This year and as I think in Q1 particularly Q1 is generally January is particularly difficult to use as a guide for the rest of the quarter because it does take much longer some years for businesses to kind of hand out their budgets. And what we saw in Q1 was kind of globally a pretty weak start from the, but our international regions we are able to recover and bring that business back in the second half of the quarter or particularly in March. In North America that did not happen particularly because some of our distribution channel partners were little skittish about the overall economic situation and did not want to be called out with too much inventory, if the market weren’t going to come back the way we had hoped. So, they decided to bring down inventories quite aggressively.

Okay, and then just in terms of implications for the guidance, if we look at sort of the midpoint of the range that seems to imply that the hardware business, the printer business sort of recovers at sort of the same run-rate that you saw let’s call it second half of last year, is that sort of right way to think about the hardware business?

Yeah, I think so, we are expecting that the sales in and sales out from our distribution partners will be neutral in the quarter. We are not expecting there to be any – we are not factoring in any changes to the inventory particularly.

Okay, great. And then just turning towards the product mix and ASPs, are you seeing maybe a fundamental change in the customer demand in terms of the mix of products that they are looking at, is it focus more now on mobile and desktop and maybe less on high performance?

Yeah, the AUP as we said had been – is driven primarily by mix for us. We had a little less of our high end product line go through and we have done lots of work over the last quarter and the prior quarters. Now, to really try to understand very clearly what is driving it and what are the conclusions from this. And so far maybe the conclusions we have is that the pricing within each of our product family is very stable. There is a very modest price erosion over time. But the – some of our new or more low end products are growing much faster than the historical product portfolio we had. So, we are seeing a stronger growth in the low end of the portfolio and so the mix then becomes lower priced, but we are also spending a lot of effort making sure we are aggressively taking costs out of those products. So, that the gross margin of those products should be kind of within the band of normal as we see at – for gross margins.

We did talk a little bit about the mix relative to the geographies, so if you kind of go back to the previous comments around some of the North America refresh which tends to be centered on manufacturing and warehousing. And if you look at what happened globally within EMEA some constraints in the German market, which is a very heavy industrial manufacturing market for us and then you add in factory in China, which has – we have been leveraging off of multi-national manufacturing. That actually kind of accelerated a little bit more of a distortion in the mix. And so to Anders’ point where we are seeing some new business opportunity. And that tends to be in some of the mobile desktop space and those markets kind of re-correct or rewrite themselves. We think that mix will actually become a little rich, or it’s actually reflected that way for us in our second quarter.

Great. And then last question, can you talk a little bit about the cadence or anticipated cadence of new product introductions, I think last year, you had 14. It looks likes you are off to a good start with 4 this quarter, but would you anticipate to be above that 14, that you guys achieved last year?

Yeah, our expectation is that we will launch a similar amount of new products in 2013 as we did in 2012. You will probably see a slightly higher emphasis around software. So, the Link-OS software platform that we talked about here now, we are going to have several releases of that coming out in the year. So, the emphasis would move slightly more towards software, but you should expect a similar cadence on new product introductions going forward.

Great thank you very much.

Okay. Our next question comes from John Barta. Please go ahead.

Yeah, hi, and thank you for taking my question. My guess on the OpEx side, each line item was up quite a bit, while revenue was down. Can you provide a little more additional color on what were the puts and takes there?

Yeah, this is Mike Smiley. There is a couple of things that are going on. First of all, we have – we did do those StepOne and LaserBand acquisition, which drove a little bit of our increase. The other thing, I would say, is that when you compare year-over-year right we end up with – we end up giving our withholding and those types of things happened in the first quarter, it happened in both quarters, but we also have the fact that we have had more the raises come out in the first quarter that sort of increases first quarter to first quarter. We also had increase in some headcount over and above the LaserBand and the StepOne acquisition mostly in areas that we are trying to invest and grow, and which is in the sales and marketing and the engineering. For example, engineering resources in China, our supply chain resources in China, and then some sales and marketing resources. So, most of it is really as I mentioned before employee-related expenses.

Okay. And then more of a housekeeping question, could you just restate the long-term gross margin goal or target?

Our long-term gross margin target has not changed from prior quarters we say high 40%, so 48% to 50% is our expected target range.

And I think we would classify the results for this quarter lowish, I don’t think this is what we would view is in the – what we were expecting long run.

Alright, thank you.

Yeah.

(Operator Instructions) And with that, our next question comes from Greg Halter. Please go ahead.

Yeah, thank you and good morning.

Good morning.

On your combined cash and investment holdings of $417 million or slightly over, what was the return on that in the quarter?

It’s like 0.7% or something it’s very low.

Okay. And given there was only I think $4 million repurchased of shares, just wonder what your thoughts are going forward given the cash earning not a whole lot in $400 plus million of cash?

Yeah, we have always kind of said that we view stock buyback as one of the key uses of cash for us. And if you look historically we have retuned quite a lot of cash through stock buybacks over the last five years. I think we reduced share capital by the third. This quarter, we also always said that we want to be opportunistic in when we buyback shares. And in Q1, there was such a strong momentum behind the share price you felt that that there will be chasing the share price up. And we rather have the patience to wait for right opportunities you go back to Q3, 2011 when we bought back 1.8 million shares in one quarter. So, we have I think shown that we are willing to do that in the right opportunities.

Alright. And one other quick one customer A had a pretty good drop about five points I guess on a year-over-year basis, would that explain the comments in your – partially explain the comments in your release regarding slowdown of North America and Channel Partners and so forth?

It would not necessarily explain the slowdown in the sales out of total market, which was quite strong, but it would indicate that that’s where an inventory correction took place.

Alright, thank you.

Okay, our next question comes from Paul Coster. Please go ahead.

Yeah, thanks for taking my question. Anders you seem to be indicating growth will accelerate somewhat in second half of this year, which is sort of book and ship business, it’s difficult to stay, but you seem quite confident and somehow or another it’s also going to sort of express something new at the company. What’s going on, why do you have such good visibility into this improvement in the second half of the year, and what is the message that you are trying to convey here regarding the change at Zebra.

First I guess we are giving guidance for the next quarter, we talked about kind of the larger deal pipeline being strong and expecting some good things from that come out, but the focus really of the common zone on Q2. And the guidance we have given is the way we put that together is very much in line with how we put together guidance for like the 23 quarters that I have been part of doing this. And I feel that the booking trends so far this quarter, the pipeline we have, the conversations we have with our customers, which I feel is getting more constructive is lending itself to that to be a reasonable forecast that with the same risk profile, I would say as we normally have in our forecast.

Okay, in your Analyst Day from last year, I think you talked about sort of growth aspiration, what was that, and do you think that can be achieved this year?

The way we laid it out at our analyst meeting I think it was March or February 2012 was that we saw a market growth, a base market growth of 6% to 7% based on VDCs independent analyst research. And we said we think we could grow 2% to 3% faster than the market. In 2012, I don’t think we have seen official market data yet, but I am confident that market did not grow, 6% to 7%, but I believe that we grew our market share quite substantially. So, at least that piece of it I think we got right. For 2013, it’s clearly harder to achieve a higher single digit growth for the year, when we have a weak first quarter, but we do feel that the over the next several years, when the markets become even, I would say in last few years, we have had some really good years, and some really crap years, but I think in an normalized economic environment, I believe that we should be able to get into a higher-single digits growth rates.

Alright, thank you.

Okay, now I will turn it back to our speakers for closing remarks.

Thank you everybody for joining us today. We look forward to keeping in touch with you as we progress through 2013. Have a good day.