Motorola Solutions, Inc. (MSI) Earnings Call Transcript & Summary

One of the questions we always get, and I'm sure you're at nauseam for talking about this. Why won't LTE just replace LMR over time, especially as we become a little bit more video-centric?

Yes, it's a good question. By the way, what public safety wants most from us is coverage and resilience, right? Those are the 2 things that really determine whether or not a particular technology is capable of serving the needs of our customers. Where LTE today has substantial weakness is 1 on coverage and coverage not because of just raw hey, is this area covered. It's because given the frequency at which typical cellular signals work, getting coverage right basement of a building or in the depths of some place where there's an Urban Canyon, there is questionable coverage irrespect of what other priority preemption and other things that the network starts to introduce. That remains a significant challenge. Secondly, it's a resilience problem. The resilience problem is 1 where, let's say, a cell tower sales, everything yes, all communication goes down. you think about how an LMR network works. And LMR network is private. It's a private network. It's dedicated to that customer's use just for public safety. Secondly, if the main site fails, the main network sales, the site still operate. So everything that at the site level, everybody connected to that site can still continue to talk to each other. If the site fails, the devices can actually talk to each other. So if 2 officers are a mile apart, there's something called direct mode that are radio support, where they're able to have that conversation directly irrespective of what other infrastructure is a lot. So at the end of it, resilience means that we can operate either with infrastructure, with partially available infrastructure or with no infrastructure at all. And that is a significant difference and necessity compared to a typical cellular network. Now if I take a step back, this can't be a question of LMR versus LTE or even for that matter of fact, LEO satellite capabilities, right? One of our core advantages is across our LMR infrastructure and our devices, we have software-based abstraction. It's an application that's the most common application that gets bundled with our Apex Next device is called SmartConnect. What SmartConnect does is in the eyes of the user abstracts all their interactions with networks from what their needs are to communicate. So whether that's voice, whether that's video, whether that's messaging, whatever, we will choose the right most available carrier in the background to make sure that, that communication fits the need of the application and also is resilient across those different carriers. So at the end of the day, when you think about resilience and coverage by making sure that LMR is part of the story, LTE is part of the story, satellite is part of the story all within 1 device. and also on infrastructure in the back end, D-Series sites also support Leo backhaul by the way. You put all those pieces together, we are the solution that is maximally resilient while making sure the user never has to care whether they're using LMR, LTE or LEO, it just looks.

So maybe on that end, you brought up satellite here, Leo. Is it going to be this kind of -- like how do we think about that balance then between LMR and LEO, -- why isn't satellite more of a threat?

So when you think about satellites today, the bandwidth download and the bandwidth upload is fairly limited when you -- especially when you're thinking about it in the director device fashion. So what LEO today can reasonably support are things like messaging type of applications, telemetry, location data, understanding where an officer is at a given moment. Today, the available QOS controls for audio are still in the -- more or less in the nonexisting stages, where it's not a reliable replacement for LMR. The other thing is it's also just physics of the frequencies that are being used for director device communications through satellite. There are higher frequencies and those frequencies don't penetrate structures, hard structures that easily. So if you have clear line of sight to the sky, yes, you may have good connectivity. The moment you go within a building or in a sheltered area of any sort, which is where lots of incident responses happen. it ends up being unreliable, even if you have the bandwidth to have audio being uploaded. We do use LEO, where LEO is useful is in our base stations, where we have an antenna that has a clear view of the sky, there's bandwidth upload. It's not a direct or device type of problem. It's not a device power problem. There, as a backup to effectively wired communication backhaul, LEO has a very clear role to play. It is like having fiber coming into your house and then using WiFi for all your devices, I think there's a similar complementary relationship between everything that we do with LMR, LTE, LEO.

Got it. One of the things that's been going on in this space broadly on public safety is a lot of, I'll say, flag around some data privacy if you kind of get the reference there. But especially as you think about automated license plate readers and analytics, how is Motorola proactively collaborating with some of these communities and agencies to build trust and transparency around being responsible with AI?

Yes. So any time we think about any sort of data or AI-oriented product capability or product itself. For us, it starts with, should we do it question. And internally, we have a Motorola Technology Advisory Council. This bunch of people are cross-functional. So they are not just engineers, they're not product managers. They're not just in sales, it's across the entire organization. They represent a cross-section of the community that can come in and say, "Hey, we think that this is worthwhile to do. There's a clear benefit to it, or no, this is probably something that we should not go after. So that's the first gate. The second is once we decide that we're actually going to do it, we also very carefully enumerate the risks associated with building the technology. There's almost always a clear benefit, which is why we've engaged in the process, but then there may be some inadvertent things with the misuse of the technology, to be whatever else that we say, okay, here are risks that we need to think about? And then we ask the question, can we figure out sufficiently good mitigation to the [indiscernible]. And if the answer to that is yes, when we then will continue with quite a few things that are out there today in terms of data privacy and such. Our first elements to mitigation is we have incredibly tight audit controls. For one, public safety customers of ours, they own their data 100%. We don't -- we use what we call a 0 trust sharing philosophy in that customer data doesn't get automatically shared, we don't make that choice at all. Then we give customers policy level controls. If you're running an investigation, you need to first be able to enter things like case numbers associated with why you're running that position. subsequently, you need to be able to enter a reason as to why you're running particular searches. That's been a loss for an audit log. That audit log can then be automatically sent to supervisors, so other people who can verify to make sure that the reason why somebody used this capability was a justifiable reason within policy, et cetera. We also support our customers by providing them a transparency portal. So many of our customers have a transparency site, a website where they -- so these are the technologies that are in use. This is how the technology is being used. This is the data that's being collected. This is how that data is being used. This is when some data was accessed, and this is how it's being shared if they choose to share it. So from all that standpoint, that transparency element now is another tool for the -- for our customers to gain the confidence of their community. We also offer free certification and training to all our customers to both help them use the technology appropriately but also help them with community-based conversations. We're part of a bunch of different standards organizations, APCO, Nuna, IET, et cetera, to make sure that we are indeed making sure that from a policy framework thinking standpoint, we are consistent with what our communities are asking for as well. So those are just a few ways separately. I think we also try to make absolutely sure that we are compliant with all the laws and regulations that are -- and the landscape is changing rapidly. So we make sure we are proactive in understanding where the law is heading to and implementing those controls in advance of anything actually that's taking shape. So that's how we end up hopefully doing this in a very responsible way for our customers.

Makes sense. Maybe just moving over to drones, which is kind of the hot topic in the space. What's Motorola's strategy here with Sivas and -- now defend as part of the family here. How are you thinking about sort of the detection versus mitigation side of Jones and counter drone DFR?

So to begin with, Silvas focused on defense, defend very much a public safety critical infrastructure play. To defend sounds like defense, but defend is not focused on defense. So in terms of Silvas and where Silvas is focused, it's really enablement for drone communications in the battlefield. It is making sure that when drones and autonomous vehicles of all sorts need to communicate in the battlefield where they could be jammed where the communication could be intercepted in some way where you need to make sure that the communications be not -- should not be detected in the first place. That is where Silvas really shines. That is where the intellectual property that Silver Spring block to the table is differentiated from everybody else in the space. That's why it's adopted as the default communication modality for many networks for unmanned systems as a whole. As part of that, we also have spectrum monitoring capabilities, which is understanding what kind of RF emissions are happening space. to understand perhaps there's a drone that's coming in and enabling detection of that drone based upon RF emissions but really focused on more defense-oriented problem sets. And that's also part of the service portfolio. defend extends that, but really from a public safety standpoint. This is our ability to not just detect drones based upon RF emissions capture remote ID data from drones. And usually, most consumer drones group, what's called Group I, Group II and Group III drones that are above 250 grams in weight. They all need to broadcast remote ID. defend can capture that. defend can capture RF emissions, full-on detection. But what sets defend apart from everybody else is that they can -- they have a mitigation model. This mitigation model is 1 where it doesn't focus on destroying the drone or jamming all communication to the drone, we're able to take over control of the drone in populated areas and land it safely, which means that if you're trying to mitigate the presence of a malicious drone in a stadium or in a populated urban area, defend is the only option you really have, which is why 11 out of the 12 FIFA stadiums stadiums of PostFiFA leverage defend as the key solution for mitigation and detection. So that is the defend counter UAS story. And separately, on the drone as a first responder solution, which is also squarely focused on the public safety market, we have our strategic alliance with Brink. we recently increased our investment in Brink and we have an exclusive -- we are their exclusive channel into public safety in North America. We're tightly integrating that into our core solutions as well. And there, again, where we see the evolution here, much like defend from a counter U.S. standpoint was not just detection. Detection is a problem that there are many solutions for is a mitigation that really sets defend apart, especially mitigation in urban populated areas. In the case of Brink, where we see the DFR advantage really becoming a big deal, it's not just getting eyes on site as quickly as possible. but defense next-generation drones can actually carry a payload. They can actually deliver things that are needed, whether that's a personal flotation device, a defibrillator, a Narcan canister, whatever else that you potentially may need. It is actually an active participant in the response as opposed to just being eyes on site as quickly as possible. So when you think about that Silvas really anti-GM- low probability of detection, low probability of intercept, really sets it apart in the battlefield scenario for defense applications, unmanned systems, you think about defend mitigation, unique capability for Group 1, 2 and 3 drones in urban populated environments, public safety focused and Brink really from a DFR standpoint, not just being eyes on site, but giving us a path where the drones become an active participant of the response, that is where we see our drone strategy really taking shape.

Yes. And maybe just on the video side quickly. You guys have been with Alta moving from on-prem to cloud. How is that playing out? How is that conversion been? And what differentiates Alta versus some of the competitors out there?

Yes. So by the way, this week, there's a video security show called Geo process right now in Atlanta. Actually, I think it ends today. and we introduced a new solution called Avigilon extend. And 1 of the core things with Avigilon Extend is we are bringing together what historically used to be either strictly cloud, that is Alta or strictly on-premises as Unity. goes to a converging to 1 plan. And to your question about migration, we want to make it very easy for our customers to not just migrate from on-premises to cloud if they think it's appropriate. But in many cases, it's actually the case that some customers, especially international customers, who want to be on-premises, except in certain cases where they want to extend to the cloud. So we want to be as flexible as possible. At the end of the day, their choice as to what's cloud hosted -- they have -- they're free to make that choice. In many cases, they want to be fully cloud managed and what Avigilon Extend does is it allows cloud management for the entire portfolio of products. And so we see this convergence between Altimmunity actively happening in terms of differentiation. First is Alta is an open platform. In other words, it allows us very flexibly to take over brownfield installation. Customers who previously perhaps weren't thinking about cloud, perhaps who have a deep investment in existing cameras or infrastructure, Alta has the capacity to take all of that ingest that into its system and offer a unified cloud managed framework, along with all the analytics and AI capabilities that we offer on top of it. Over the past few years, we've added a numerous set of modules that are either vertical specific or specific to particular use cases, visitor management is a very good example. All that complements the Alta story in a manner where with a single pane of glass, our end users can manage everything that they have on site, add new capabilities without necessarily ripping and replacing everything that they already have spent money on in a time line that is, I think, sensible for them. So we think that, that is a powerful story. Operator, just a quick minute on that. Operator is our overall umbrella platform that then takes Alta video, now Avigilon Extend video, access control data integrates push-to-talk systems so that for customers that have a security operations center, -- now they have 1 Platanaglass, a single platform that is AI native that orchestrates the response across everything that they're doing. And for customers who do not have a physical security operations center, Operator is the Agendic platform that will handle their response for them and really make that something where you're not just getting video or access control is an insurance policy when something goes wrong, you have evidence after the fact, you can actually actively prevent, mitigate that incident as well in a fairly automated way, including, by the way, escalations to public safety. So when you look at all of that, that's how Alta and our video security portfolio is quite different from, I think, what other options in the market.

Awesome. Well, we're out of time, but we can talk about this for a long a lot more, if possible. But I appreciate you joining us. I appreciate everybody in the audience and have a good rest of your day.

Thank you, James.