Wedgewood Partners: Motorola Solutions ($MSI) Investment Case

In their Q3 2026 client letter, “Bad Moon Rising,” Wedgewood Partners gives an update on Motorola Solutions ($MSI), a holding since May 2019 and one of the quarter’s top contributors. The letter comes as the firm describes a difficult market: the 10-year Treasury yield reached 5.35% and most stocks sold off sharply while AI-linked megacaps pushed the indexes to new highs. Against that backdrop, Wedgewood presents Motorola as a business whose results have been “remarkably predictable.” The firm believes Motorola has used its entrenched position in mission-critical communications to add faster-growing, higher-margin products. It describes the company as a durable double-digit grower that the market has only recently begun to recognize.

Investment Highlight: Motorola Solutions ($MSI)

Business Overview

• Wedgewood describes Motorola as the dominant leader in Land Mobile Radio (LMR). LMR means secure, highly resilient networks, handsets, software and services for police, emergency services, government, military and commercial users.
• The company operates three technology segments:
• • Mission Critical Networks
  • Video, covering fixed and mobile cameras and security systems
  • Command Center, an emergency suite running from data intake and dispatch through incident resolution
• According to the letter, each segment is expected to grow over 10% in 2026.
• Roughly 75% of revenue comes from public safety and defense customers, and North American state and local governments account for over 60% of that segment. The remaining 25% comes from corporate customers such as utilities, schools, hospitals and stadiums.
• Wedgewood acknowledges that Motorola faces credible competition in its ancillary product lines. The firm views it as the only player able to fully integrate its entire offering with its core LMR network.

Q3 2026 Results

• Revenue grew 13%, and the firm notes margin expansion drove a 24% increase in earnings per share.
• Backlog grew by double digits to a record, with 95% coming from government customers.
• Wedgewood sees the company as in the early innings of refreshing more than 40 statewide LMR networks. The firm expects this to support the core business well into the next decade.
• Despite these results, Wedgewood believes the market still underappreciates the stock.

Shift Toward Higher-Margin Products

• As of year-end 2025, roughly half of revenue came from video, software, unmanned systems and recurring services. The letter says all of these grow faster and at higher margins than core LMR.
• That share was 46% in 2020. Wedgewood notes that LMR’s own continued growth of roughly 3–5% a year keeps the non-LMR share from rising faster.

Consistent Financial Performance

• Wedgewood points to steady high-single-digit revenue growth over the past decade, interrupted only by a -6.0% year in 2020 during COVID.
• The firm’s data shows EBIT margin rising from 20.6% in 2016 to 25.5% in 2025.
• Wedgewood’s internal cash flow-based ROIC improved from 16.5% in 2016 to 22.7% in 2024, then fell to 17.0% in 2025. The firm attributes the drop to the Silvus acquisition: all of the acquired assets entered the calculation, but only a partial year of Silvus cash flows did. Wedgewood expects the metric to rebound.

Silvus Technologies Acquisition

• Motorola acquired Silvus in August 2025. Silvus makes networking technology for rapidly deployed, secure voice, data and video networks that resist detection, interception and jamming.
• The letter notes Ukraine has used the technology in its drone operations. Wedgewood sees opportunities in defense, intelligence, law enforcement and enterprise uses such as event security, wildfire management and border control.
• According to the letter, Silvus revenue is expected to grow roughly 30% to $875 million in 2026, from $675 million in 2025. Motorola had expected only $475 million for 2025 when it bought the business.
• Wedgewood cautions that Silvus remains small, at about 7% of 2026 revenue, and contributes only about 200bp of Motorola’s expected 11% revenue growth.
• The firm believes the acquisition’s most important long-term benefit is the advanced networking technology it brings to strengthen the core LMR business.

Valuation and Position Management

• Wedgewood says the only major change to its thesis is that Motorola is no longer under the market’s radar. The firm notes it was long confused with the consumer phone business it separated from in 2011.
• The forward P/E moved from the mid-to-high teens when Wedgewood bought, peaked in the 30s, and has recently settled in the low 20s.
• The firm built the position through 2019 and the COVID disruption, then trimmed it between 2021 and 2024 as the valuation rose.
• Wedgewood added again after a roughly 25% decline last autumn, which it attributes to fears that a federal government shutdown would delay customer funding.

Wedgewood Partners views Motorola Solutions as a predictable compounder. In the firm’s view, Motorola’s dominant LMR franchise funds a growing mix of higher-margin software, video and unmanned systems businesses, with Silvus adding further optionality. The firm remains a strong believer in the business model and keeps a core position. It expects the LMR network refresh cycle and continued mix improvement to sustain double-digit growth for years.

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