A tale of two giants, with two different stories

Some older telecommunications companies have thrived amid the massive technological changes of recent years, while others have not.

Motorola Solutions (NYSE: MSI) is one that has, and Verizon Communications (NYSE: VZ) is one that hasn’t. Motorola has produced annualized returns of 25% over the last five years and 22% over the last 10 years, easily beating the S&P 500.

In contrast, Verizon scored an annualized loss of 3% for the last five years and a paltry gain of 3% for the last 10 years.

Motorola Solutions, which focuses on public safety communications systems, was carved out of the famed Motorola Inc., one of the first cell phone manufacturers, in 2011. The original Motorola also produced microprocessors and other telecom equipment that were an important element of the personal computer and wireless revolution during the 1980s-2000s.

When Motorola Solutions was split off, the rest of Motorola Inc. was renamed Motorola Mobility.

That housed the company’s cell phone operations and was sold to Google in 2012. Google sold that company to PC maker Lenovo in 2014.

Going backward to 1973, Motorola unveiled the first hand-held portable phone. In the 2000s, it introduced the famous flip and RAZR phones, which are still popular on eBay, selling for thousands of dollars.

Today’s Motorola Solutions

Today Motorola Solutions delivers small, individual networks for each user, to avoid interference. That’s important for emergency workers trying to communicate with each other.

Since the breakup, Motorola has churned out a steady stream of strong earnings. In the latest (third) quarter, revenue rose 9% from a year earlier, and earnings per share (EPS) soared 22%.

Motorola delivers critical communication and technology solutions to public-safety agencies, governments and companies worldwide. Governments and municipalities account for about 75% of revenue.

The company’s walkie-talkie communications appear to be more reliable than cell phones for emergency communications. And Motorola resisted the temptation to pay up for 5G spectrum, which it doesn’t really need.

The company has been able to establish an elite position in its B2B niche market. “Motorola Solutions offers one of the most comprehensive solution sets for public safety, a sticky business,” Morningstar analyst Eric Compton wrote in a commentary.

“We expect continued growth and margin expansion, with potential upside if the firm can complete additional accretive acquisitions.”

History of Verizon

The cell phone and broadband service provider that today is Verizon began as Bell Atlantic in 1984, formed out of the breakup of AT&T.

For years it distinguished itself with network quality, investing heavily in wireless technology. That helped make Verizon the No. 1 cell phone service provider for number of customers.

At one point, Verizon had a complete network, including cell phone towers. But it has now sold almost all of them, as managing the sites proved to be a time-consuming burden. This distracted the company from its primary focus – providing cell phone and broadband service.

Meanwhile, the company has taken a number of missteps in recent years. It paid at least $78 billion for 5G spectrum license, but has been unable to monetize that investment. That’s because 5G offers little new to customers beyond increased speed. Meanwhile, the purchases helped boost the company’s debt to $153 billion as of September.

Digital media debacle

Verizon had an ill-fated affair with digital media, purchasing AOL and Yahoo for a combined $8.9 billion in 2015 and 2017, respectively. But the acquisitions didn’t produce much ad revenue. Verizon dumped the duo for $5 billion to Apollo Global Management in 2021.

Meanwhile, AT&T and T-Mobile US have taken away some of Verizon’s customers in the key consumer division, with lower prices and superior service.