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Motorola Solutions' enterprise sales recover after six quarters

By Sruthi Ramakrishnan

(Reuters) - Motorola Solutions Inc's sales of rugged mobile computers and tablets to businesses rose for the first time in seven quarters, sending its stock close to a six-year high.

The company, which dominates the two-way radio market, also reported a better-than-expected rise in quarterly profit despite a fall in government sales, its main business.

The weak government sales forced it to cut its full-year revenue forecast for the third time this year. However, it maintained its adjusted operating margin target for the year.

"The fact that enterprise was better than expected and EPS beat gives confidence that they will be able to meet the full year guidance in terms of operating margins, that's what people are excited (about)," Northcoast Research analyst Keith Housum said.

The company's shares were up 3 percent at $62.27 in morning trade. They rose as much as 10 percent to a near six-year high of $66.37 earlier in the session.

Sales at Motorola's enterprise business, which also makes data capture and security products, grew 2 percent in the quarter ended September 28. Revenue fell 4 percent in its government business, which accounts for 70 percent of revenue.

Many U.S. federal agencies stopped ordering in September, traditionally a strong period for such contracts, in anticipation of the government shutdown that lasted nearly three weeks to October 16, CEO Greg Brown told Reuters.

"I don't think it (federal business) is deferred and something we can close in Q4 or Q1. I think it's basically largely gone," Brown said on a conference call with analysts.

CUTS SALES FORECAST

Due to the cut in federal spending, Motorola expects revenue to be flat in the full year ending December.

In July, Motorola forecast revenue to be flat to up 1 percent this year. That was the second time it cut its forecast, both times blaming delayed purchases by its enterprise, rather than government, customers.

However, Brown said the company's overall government business would return to growth in the current quarter, while the enterprise business would fall slightly.

Brown blamed the company's sales execution for the prolonged weakness in the wireless LAN business, which is part of its enterprise business.

Reuters reported last week that Motorola is looking to sell the wireless LAN business, which has been losing market share to rivals such as Cisco Systems Inc.

The company's total revenue slipped 2 percent to $2.11 billion in third quarter, shy of the average analyst estimates of $2.13 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to Motorola rose 49 percent to $307 million, or $1.16 per share. Its adjusted profit of $1.32 per share beat analysts' estimate of $1.02 per share.

It expects full-year adjusted earnings from continuing operations of $4.63 to $4.70 per share, higher than analysts' estimate of $4.43.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Savio D'Souza)

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