摩托羅拉 (MSI) 2014 Q4 法說會逐字稿

Good morning and thank you for holding.

Welcome to the Motorola Solutions fourth-quarter 2014 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 made available approximately three 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.

Thanks and good morning.

I'd like to welcome you to our conference call to discuss financial and operating results for FY14 fourth quarter and full year.

With me this morning are Greg Brown, Chairman and CEO; Gino Bonanotte, Executive Vice President and CFO; Mark Moon, Executive Vice President and President, Sales and Product Operations; and Bob Schassler, Executive Vice President, Solutions and Services.

Greg and Gino will review our results along with commentary, and Mark and Bob will join for the Q&A portion of the call.

We have posted an earnings presentation and press release at motorolasolutions.com/investor.

These materials include GAAP to non-GAAP reconciliations for your reference, which we encourage you to review.

I would also like to remind you that we'll be hosting our Financial Analyst Day on February 17 here at our headquarters in Schaumburg.

Please feel free to contact Investor Relations if you have questions regarding the event.

A number of forward-looking statements will be made during this presentation and during Q&A.

These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties.

Actual results could differ materially from these forward-looking statements.

Information about factors that could cause such differences can be found in this morning's earnings press release.

In the comments made during this conference call in the risk factor session of our 2013 annual report on form 10-K and quarterly report on form 10-Q ended March 29, 2014, as well as other MSR reports and filings with the SEC.

We do not undertake any duty to update any forward-looking statement.

I'd like to now turn it over to Greg.

Thanks, Jeff.

Good morning and thanks for joining us today.

Q4 was a solid quarter for Motorola Solutions and we continue to see signs of recovery in large parts of our business.

As I think about the quarter and beyond, there are a few thoughts I'd like to share.

First, we continue to see improvement in our North America business.

Q4 marked the return to growth and we're encouraged by indicators such as orders, backlog and device sales as we move in to 2015.

Second, just last week we secured a contract valued at over $200 million with a country in the Middle East for a nationwide smart communications network utilizing our Public Safety LTE solution.

This now gives us the three largest Public Safety LTE awards to date, with the LA-RICS contract implementation underway and $100 million deal in another Middle East country that begins deployment this year.

It's encouraging to see investments made over the past several years starting to drive associated revenue.

And third, our efforts around simplification and rationalizing our cost structure remain on course.

We closed the year with more than $200 million in OpEx savings versus full-year 2013, and ended the year with a run rate that should position us well to achieve approximately $150 million of further reductions this year.

I'll now turn the call over to Gino to provide additional details on Q4 results and our outlook.

Thank you, Greg, and good morning, everyone.

Q4 2014 revenue was $1.8 billion, a slight increase over Q4 2013 and a reflection of robust order activity and faster-than-expected conversion of certain orders.

These results come despite $27 million of currency headwinds in the quarter.

GAAP operating earnings were a loss of $1 billion, which included a one-time charge of $1.9 billion due to our pension de-risking transaction.

Non-GAAP operating earnings were $483 million or 26.5% of sales, up from the year-ago quarter of 21.8%.

GAAP EPS from continuing operations was a loss of $4.02 compared to a gain of $1.12 in the fourth quarter of 2013.

Non-GAAP EPS was $1.25 compared to $1.37 in the year-ago quarter, which included a $0.42 benefit from the formation of our international holding company in 2013.

For the remainder of this call we will reference non-GAAP financial results, including those in our outlook, unless otherwise noted.

Turning to segment results.

In products, Q4 sales were a record $1.25 billion, up 3% versus the prior year's quarter.

Growth was driven by strong demand in North America for our P25 and PCR device product lines, while TETRA devices grew robustly on a global basis.

Q4 product segment operating income was $394 million, or 32% of sales, up from $283 million, or 23% of sales in Q4 of 2013.

Significant operating leverage provided by our cost reduction actions drove higher operating income.

Moving to product backlog.

Product segment backlog is $1.2 billion, which has increased for three consecutive quarters.

Product backlog is up $53 million versus last year and up $16 million sequentially despite strong revenues in Q4.

The year-over-year increase in backlog is driven by North America and APME.

For the full year, operating income was $754 million, or 19.8% of sales, which is up from last year due to cost reductions realized in 2014.

Turning to services.

Q4 services revenue was $577 million.

Excluding iDEN, services declined 2%, while declining 5% overall.

Q4 integration services revenue was down as expected versus Q4 2013's record quarter, which accompanied strong systems revenue in 2013.

Q4 life cycle support services grew modestly overall and strong demand for our software maintenance contracts and steady demand for our hardware upgrades.

Managed services grew across all regions, as increasing complexity and the need for enhanced capabilities to support software-centric IT-based networks continues to drive demand.

Services operating income was $89 million, down $24 million to 15.4% of revenue, driven primarily by lower iDEN sales and lower gross margin associated with systems integration mix.

Gross margin in life cycle management, managed services and smart public safety was relatively flat.

While we will continue to see project mix-related pressure in the first half of 2015, we expect gross margins to return to the mid 30% range going forward for our overall services business.

Total Company operating expenses from continuing operations were $431 million, down $86 million or 17% from the year-ago quarter, driven by continued cost reduction activities.

G&A and R&D posted the largest year-over-year declines and we expect significant savings across all major categories again for 2015.

Q4 other income and expense was a net expense of $39 million compared to $19 million in the year-ago quarter.

The difference was primarily driven by ongoing higher interest expense in Q4 of 2014 and gains on investment sales in the prior-year quarter.

In Q1 we expect OIE of $45 million versus $19 million in Q1 of 2014, driven primarily by higher interest expense.

Other income and expense is expected to be approximately $180 million for 2015.

With respect to taxes, our Q4 effective tax rate was 35%.

Our Q1 and full-year 2015 effective tax rate are expected to be approximately 33%.

More importantly, we expect our cash tax rate to be approximately 15% for 2015 and continuing through 2019.

Turning to cash flow.

Q4 cash flow from operations was a net use of $700 million, which includes $850 million in funding related to the US pension de-risking actions coupled with funding our UK plan.

For the year, operating cash flow from continuing operations was a net use of $685 million, driven by pension contributions of $1.3 billion.

We ended 2014 with $4 billion in total cash and $3.4 billion in debt.

In Q4 we repurchased $1.4 billion of stock.

For the full year we repurchased $2.5 billion in stock.

We have reduced our net share count by 36% since the program's inception in Q3 of 2011.

In addition, we paid $82 million in dividends during the quarter and $318 million for the year.

Turning to our outlook, we expect 2015 sales to be flat to down 2%.

In constant currency terms, this translates to growth of 1% to 3% versus the prior year.

For the year, we expect growth in North America, growth in Latin America, excluding iDEN, growth in the Middle East.

We expect to be flat in Asia Pacific, inclusive of currency headwinds.

Contraction in Europe and Africa due to currency headwinds and the Norway implementation completion.

And a decline in iDEN of between $25 million to $50 million.

We also expect OpEx to be down approximately $150 million year over year.

Significant improvement in profitability with EBITDA in the range of $1.3 billion to $1.36 billion, EPS of $3.15 to $3.35, and operating cash flow of approximately $1 billion for the full year.

In Q1 we expect sales to decline 2% to 4%, reflecting better-than-anticipated order conversion in Q4, along with approximately $40 million in currency headwinds.

In constant currency terms, we expect revenue to be down 1% to up 1%.

This outlook assumes North America growth for the quarter and a contraction in Europe and Asia driven primarily by currency headwinds.

We expect Q1 EPS of $0.22 to $0.27.

I'll now turn it back to Greg.

Thanks.

I'll now provide some additional color on our Q4 results and outlook.

I'm generally pleased with our Q4 results, and more specifically, the improving trends we're seeing in North America.

Q4 revenue was up slightly and marked a quarterly record for the Company.

Despite stronger-than-anticipated end-of-the-year order conversion and currency headwinds, our backlog position still continued to grow and we ended Q4 with a higher total backlog, higher product backlog, and higher backlog scheduled to ship in 2015.

From a regional perspective, our North America business was up 4% in Q4.

North America backlog is up $50 million in products and $586 million in services versus last year, which is a positive sign for this region.

The Europe and Africa region declined 5% in Q4, which marked the first decline in nine quarters.

Currency headwinds was the key contributor to this decline and is expected to weigh on our full-year results in the region.

However, I believe we have and will continue to execute well relative to the market in this region, and are well positioned for long-term growth as these factors dissipate.

Turning to the Asia Pac Middle East region, we saw an 8% sales decline in Q4.

This decline was driven by Asia Pac.

However, sales are starting to stabilize in this region and backlog is up sequentially, as we're seeing some improvements in the customer pipeline.

Our Middle East business continues to grow and build momentum in both product and services backlog.

By the way, these backlog numbers will continue to improve with the addition of the $200 million country-wide public safety LTE contract I referenced earlier.

And finally, our Latin America business in Q4 increased 3%, excluding iDEN, and 1% overall.

Backlog in Latin America is up modestly year over year and up significantly from a sequential view driven by services.

The wind-down of iDEN will continue to negatively impact this region disproportionately in 2015.

Turning the segment highlights, first in products.

We secured several strategic product awards in Q4 that include $148 million with the State of Michigan to upgrade their statewide ASTRO network; including over $30 million in services; $20 million with the state and local customer in the Northeast to upgrade to a fully P25-compatible solution with improved coverage and improved interoperability; $12 million with Eastman Chemical to enable their multi-state operations.

Moving to services, I'm encouraged by Q4 revenue, growth in life cycle support and managed services.

I think marketplace trends such as the prevalence of video and social media used in policing, continue to validate our investments in areas such as realtime crime centers, video and data analytics and CAD integration.

Services backlog is up significantly on new multi-year deals, despite currency headwinds.

Q4 brought several notable services wins, including a $64 million extension with Prince George's County to provide full turn-key services in maintaining their mission-critical systems and smart public safety systems, while keeping their networks up to date with various life cycle products.

A two-year $36 million managed services extension of the Victorian Mobile Data Network in Australia.

$31 million with the Las Vegas Metro PD for long-term software and hardware maintenance of radio and CAD systems, as well as technical support and life cycle services.

And $15 million with Mininco in Latin America for a multi-year managed services contract to include administration and monitoring of their network, as well as the maintenance on their devices and a help desk for end users.

So let me close by saying this was a challenging but transformational year for our Company.

We divested our enterprise business for just under $3.5 billion, significantly improved our risk profile and cash flow through pension de-risking actions, achieved more than $200 million in OpEx savings, including over $70 million in R&D reductions, while simultaneously shifting more investment towards new growth areas.

We've restructured the Company to increase our focuses on services as a line of business, and reaffirmed our commitment to capital return and a more efficient capital structure with $5 billion of additional repurchase authorization and $2.9 billion of stock buyback and dividends returned in 2014.

As a result of these actions, we're in a better position.

We're in a better position to grow, drive significant operating leverage, deliver strong cash flow, and drive shareholder value for years to come.

I'll now turn it over to Shep.

Thanks.

Before we begin taking questions, I would like to remind callers to limit themselves to one question and a followup so we can accommodate as many people as possible.

Operator, would you please remind our callers on the line how to ask a question?

Certainly.

At this time, the floor is now open for questions.

(Operator Instructions)

Kulbinder Garcha, Credit Suisse.

Hi, guys.

Thanks for the question.

I wanted to clarify one thing about the revenue trends.

So constant currency, taking currency out of it, in Q4 you saw slight re-acceleration, but you're decelerating again in Q1 slightly.

I know it's very slight, but I was under the impression that given the order backlog, easy comps, visibility in government, LTE, all these things were going to cause revenue to gradually reaccelerate as you went through the year, but you're starting the year off a little bit slow.

That's one question on revenues.

On the first quarter earnings guidance, am I right that you're saying that the ops margin of the business is going to more than halve sequentially?

That's a bit worse than the normal seasonal trend.

I know obviously you have to look at what government used to do, but it seems a lot worse.

Is there something on the cost side or mix side that is going to be significant in the first quarter or first half, that isn't there for the back half?

Thanks.

Hello, Kulbinder, this is Gino.

We'll start with Q1.

I think it's instructive to note in Q1 that $40 million, we have $40 million of pressure from FX headwind in Q1.

That's 3%, 3 points of growth, as well as iDEN being down $12 million, which represents another 1 point of growth.

In addition to about $40 million, or 3 points of growth, from better conversion of Q4 orders, more revenue in Q4.

So that's really what's impacting Q1.

From a margin perspective in Q1, I think that was the second part of the question, earnings, we did as you referenced.

We expect to continue to see some pressure in our installation services margin based on project mix and the projects that were expected to deploy, continuing from Q4 into Q1.

But we do expect that to stabilize and return to normal gross margin rates of 35%, approximately 35%.

Also incremental interest in OIE as well, is driving a little bit of the EPS.

So Gino, to understand that point, this project mix, can you elaborate a little bit?

Because it's causing quite a seasonality, if I get your comments right, in the margin trends.

So what exactly is it?

And it goes away quite quickly, it sounds like.

I'm trying to understand what exactly is going on.

It does.

It references some projects that we're currently deploying.

As an example, the Nodnett project.

And we're deploying the northern part of Norway right now.

And the cost to deploy that is more challenging than normal deployments.

So it's really a reflection of the mix of projects we've had in Q4 and Q1.

As those projects roll off the margin stabilizes.

Okay, thank you.

Rod Hall, JPMorgan.

Hi, thanks for taking my question.

This is Ashwin on behalf of Rod.

Greg, I was hoping you could comment recent FCC spectrum auctions and if there is any change in your thinking on the pace of US Public Safety LTE roll-outs.

Also if you could give us some sense of how much US Public Safety LTE is included in your 2015 revenue guidance.

And is there any chance you can give us a growth rate excluding that for 2015?

Yes, just a few things.

So we had talked about Public Safety LTE being about double in 2015 versus our run rate in 2014.

We still believe that that's the case.

And we feel even better about that amount with the securing of the third contract I talked about in the Middle East.

So we remain pretty resolute and expect that that will occur.

A little bit north of $100 million in 2015.

I think the auction spectrum developments recently are a positive, specifically as it relates to FirstNet.

The $44 billion of proceeds by the federal government allows the fully funding of the $7 billion that's contemplated in the Middle Class Jobs Relief Act.

At the end of the day here in the US, the two most important things to facilitate and enable Public Safety LTE to be rolled out are dedicated spectrum and funding.

The spectrum has been dedicated, as you know, at the 700 megahertz slice that remains dedicated to public safety.

And the $7 billion is now fully funded with the very successful close of the AWS auction.

The only other thing I'd comment is, our focus is on continued engagement globally, on Public Safety LTE.

And there's still a pipeline of opportunities we'll pursue, but I think this year is quite important for us to implement the deals that we have, to implement LA-RICS, to start the implementation on the deal we just secured last week.

And to implement in the second half of this year the other Middle Eastern country that we referred to with our $100 million deal.

As we continue to compete and win on these deals, we see no chilling or impact on LMR and continue to see LMR purchases and Public Safety LTE to be additive to those purchases.

So I think the auctions are a positive.

Okay, thanks.

Ehud Gelblum, Citigroup.

Good morning, guys, appreciate it.

A couple clarifications.

Can you give us a sense as to what the headwind from Norway looks like as you go into 2015?

And then the product backlog looks strong, it keeps going up.

One of the things I wonder, you said, Greg, that the product backlog with respect to what falls in 2015, was strong as well.

Can you give us a sense to what the duration of that backlog did from the end of 2013 to the end of 2014, with respect to if you were to say the average of the backlog time-wise?

Did it stay relatively constant?

Or are we putting more longer-term contracts into the backlog?

Just to get a sense of how immediate that backlog is.

And then lastly, Gino, on the guidance, can you give us a sense as to where you think the gross and operating margins settle out?

We can back in to it a little bit from the EPS, but it's a wide range of EPS guidance for 2015.

I just want to make sure we're on the right page as to the way that the operating margin settles out.

And what share count you were using, given all the buybacks that are going to happen, to get us in to that rate range of $3.15 to $3.35.

Thanks.

Sure, Ehud, this is Gino.

I'll start with respect to the Norway project.

We're completing the implementation this year, later on this year.

Year over year 2015 versus 2014 there's less implementation revenue.

Approximately $50 million of less revenue from an implementation perspective, as we talked about, the gross margins.

The system, I'll remind you that the system is primarily deployment of the infrastructure.

The initial part of the project, with the opportunity for incremental handsets and multi-year services beyond implementation.

The phase that we're talking about is the implementation phase of the project.

With respect to margins, we expect gross margin profile to be consistent with last year overall.

And gross margins and product and services to be consistent.

The comment on backlog, product backlog, as we mentioned, product backlog is up.

The duration of product backlog hasn't really changed significantly.

In services backlog, as we incrementally add multi-year service deals, the duration of the services backlog does extend further than our traditional services backlog which didn't include that magnitude of multi-year.

In some cases 15-year, 20-year service deals.

Just a quick add on, backlog though, and I think part of your question, Ehud, was aging, as we talked about last year in Q1, for this year $125 million additional aged in to the year of our backlog.

Okay, that's helpful.

And in constant currency terms, that's reflected in the 1% to 3% growth.

Correct.

On the OpEx, you mentioned that OpEx would be down $150 million, I believe, next year.

That gets us to around 165, if I'm doing the math, a little lower than before.

Are there more actions that you're -- is that a new program that's being implemented?

Or is my math wrong?

Or does FX help you a little bit on the OpEx side as well?

I think, Ehud, as we continue to march forward and we go through this organization in a very systemic way, under what we call a program run by Michael Lannis, we continue to find opportunities to streamline and cost save.

We had $208 million of savings last year.

We've raised it, to your point, to approximately another $150 million of which, by the way, the majority of that from a run rate standpoint is already behind us, given actions taken last year.

I don't think that's a limit or a floor but from a planning standpoint we think that's the most useful amount to use at this point in time.

But we will continue to simplify the organization, rationalize costs, and as a pure play, we think those opportunities are extended to us.

I appreciate it, thank you.

Next question.

Simona Jankowski, Goldman Sachs.

Hi, thanks very much.

Wanted to clarify on your backlog comment.

Is your shippable backlog for 2015 up?

And if you can quantify, by how much?

And I had a question on your federal exposure in the quarter.

I know that was something you had expected to come back.

If you can give us some comments on how big that was, and how you see that going forward.

Simona, this is Gino.

I'll start with the backlog question.

Age backlog in 2015 is up and it's up $125 million.

Okay, and that's across products and services together?

That's correct.

Okay, great.

This is Mark.

With respect to our federal government sales, as we talked about last year, we expected the federal government business to stabilize.

We did actually realize slight growth in 2014, so it did perform as expected.

We still see that business continuing as we expect.

We're expecting flat to modest growth this year.

And we think it will relatively follow the way it normally has with first quarter and then ramping towards the federal close.

First quarter being a little bit slower, but really no big changes.

That business now, unlike what happened at the end of 2013 where we saw a real drastic reduction, it has stabilized for us as we go forward.

Mark, is that business about 10% of the total?

With it being up a little last year and expected to be up a little this year, it feels like it's still run rating maybe 20% or 30% below where it used to be back in 2012 before all of these sequester actions and so forth came in to place.

So would you expect that to come back to those levels at some point?

Or is this a permanent decline?

So the size of the business is roughly 7% to 8% of our total.

It was slightly over $450 million last year.

You are correct that it declined as we talked about when we had that $150 million reduction, 25% to 30%.

We're trying to not estimate a big ramp to grow back.

We're trying to take a view that it will grow back slowly.

I don't know that it's permanently lost, but I don't expect that increase to be as drastic as the fall-off that happened at the end of 2013.

Thank you.

Tavis McCourt, Raymond James.

Hey, guys, thanks for taking my question.

First, on the gross margin guide, Gino, you indicated flattish year over year.

I imagine foreign currency, although a modest headwind on the top line, has got to be a pretty material headwind on gross margin.

I'm just asking, what is the offset there that allows you to feel comfortable in a flattish year over year despite the FX headwind?

And then Gino, I think Airbus's DS Communications business has been up for sale for a little while.

Is there any strategic impact depending on who buys that?

Any update on do you have a preferable buyer?

Is there any update on timing of that?

Or is that something that you think won't affect you either way?

Thanks.

Thanks, Tavis.

On gross margin, the headwind from a product cost perspective, is not as significant as I think you're modeling.

Certainly we do have headwind.

We also have some tailwind based on where we manufacture and where some of our -- from a BGM perspective, where some of the work is done as well as from a manufacturing perspective.

Tavis, as it relates to Airbus, I think their announcement to exit the business clearly has been positive for us.

I think it provides disruption and dislocation to a number of customer installations that rely on them.

They have some interesting assets.

We'll see how that plays out.

But in the meantime we are competing pretty vigorously on some key opportunities where we are not the incumbent.

And we view that as an opportunity for us to pursue in 2015 and 2016.

It's a good development for us.

Thanks a lot.

Pierre Ferragu, Bernstein Research.

Thank you, good morning.

Just a quick question on international.

If I understand one of your comments in Asia, excluding currency, you viewed as actually been growing in South America.

This institution looks very stable and that's in Europe and Africa that most of your decline is.

So my first question is Europe and Africa, excluding Norway, excluding currency, how do you feel that your 2015 looks like?

And then my second question would be what's the longest for international?

Is it the place where you would expect still very solid growth drivers?

And would you expect international to grow faster than group average beyond this currency headwind?

Beyond the compare that Norway created for this year?

Thanks.

Pierre, this is Mark.

As I think about international, I'll give you a little color around the world.

I'll start with EA as you said.

If you think of EA minus Norway and minus the currency headwinds as you said, the demand is still very positive in Norway.

Our growth across the business has been good, again, excluding the currency headwinds, which you asked me to do.

The pipeline is also good, which was referenced in the comment of Greg saying he thinks as these factors dissipate, you'll see Europe and Africa return to growth.

We also see Africa is a good growth area for us in the future.

Latin America, as you mentioned has been growing minus iDEN.

We expect that trend to continue.

iDEN will take down the overall numbers, but the core business in Latin America continues to grow.

Middle East is actually coming off of really strong growth.

And we've made some organizational changes to even put greater focus on the Middle East.

We've announced a large public safety LTE deal today.

But we also see good growth in that region.

And then when we turn to Asia, as we've talked about for a while, we've been disappointed with our recovery in Asia.

But with that being said, we have built backlog.

We actually have recognized some large deals, one of which was mentioned about Australia.

We've got a good short-term pipeline in addition to our backlog.

So we see the Asia region stabilizing and being relatively flat, inclusive currencies.

And would be growth without the currency headwinds.

So all in all, to summarize and to answer your final question, we do see international as a growth area.

The region, again, minus the large project and minus currency headwinds, we would expect to grow at a faster rate than North America.

That's great.

Thanks, Mark.

Keith Housum, Northcoast Research.

Good morning, guys, thanks for taking my question.

If we assume that FX rates today are roughly where they are today, does that change the competitive dynamics of where you guys do business around the world?

Doesn't it give Airbus or some of the Chinese competitors an advantage over you guys, based on how you guys go to market?

I don't think so.

Especially with Airbus too, given the disruption on what they're doing.

Generally, Keith, I would say broad based, no.

Okay.

And then you guys talked obviously on top line about the impact that FX is going to have.

As it rolls down to the bottom line, is for both the fourth quarter and as you look out in to the guidance, what impact is FX having on your EPS numbers?

It clearly has a commensurate flow-through benefit on the cost structure as well.

I think that is in part incorporated into the revised $150 million of cost target that we are now committing to incremental in 2015.

That said, what I would say is despite fluctuation of foreign exchange rates, because I'm pretty confident that they will bounce around, regardless of that we are still pursuing approximately $150 million, despite currency fluctuation.

But would it be safe to say that $0.05 or $0.10 would be higher if FX was not, I guess, as drastically changed over the past few months?

I think it would be fair, closer to $0.05 than to $0.10.

Got you.

And for the fourth quarter?

For the fourth quarter, really in EPS terms, perhaps $1 or $2.

Okay, thank you.

Ben Bollin, Cleveland Research.

Good morning, thanks for taking the call.

First question, when you look at the OpEx reductions that you've been identifying, you've upped the high end of the target now another $50 million.

Greg, how much more opportunity would you expect?

Is there any risk that you cut too deep?

And the second part question, a little different.

Looking at LTE in North America, Greg, you identified funding and spectrum as being the key hurdles.

When you think about a third hurdle being the political aspect, getting everyone on the same page and building consortium and understanding, where do you think we are in that process?

Thanks.

On the cost side, as I said, we've gotten -- I think the team has responded really well in simplifying and reengineering business processes and getting unnecessary costs out, largely as a result to being a pure play from a portfolio standpoint.

And we're going to continue to do that.

I don't think there's a limit or a ceiling.

My team knows that too, so we're pleased.

And by the way, when you think about and dimensionalize the $350 million of cost reduction coming off of 2013, that more than replaces the earnings that the enterprise business was contributing that we just monetized to zebra.

So we like that fact.

And this business is set up well from an operating leverage standpoint when the top line returns.

On LTE in the United States, I think funding and spectrum are enablers.

I don't think they're hurdles, because they've been achieved.

The spectrum has been dedicated and the funding has now been fully populated at $7 billion.

On the political front, you're right.

It's the continual battle between federal and state, local control, what kind of architecture and a number of regions.

The only thing I would say, Ben, is we work more closely with FirstNet than we've ever done before.

And we're committed to their success and working with them, in particular, at NTIA to make sure LA-RICS gets rolled out appropriately.

So the political side of that will continue to unfold in 2015 and 2016.

And our government affairs team and the business development people at the sales organization are working hand in glove with them, so we are coordinated in achieving the opportunities and the expectations that people have of that network.

Thank you.

You bet.

As we have no further questions, I'll turn the floor back over to Mr. Shep Dunlap, Vice President of Investor Relations, for any additional closing remarks.

Thanks.

As mentioned at the out set, we made a number of forward-looking statements during the call, including outlook related to OpEx, gross margins, other income expense, sales, EBITDA, EPS, operating cash flow, as well as effective and cash rates, currency impact, growth and contraction by region, iDEN revenue decline and backlog, as well as the growth of public safety LTE.

Thanks, and we'll talk to you soon.

Ladies and gentlemen, this does conclude today's teleconference.

A replay of this call will be available over the internet in approximately three 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.