Anders Gustafsson – CEO Mike Smiley – CFO Mike Terzich – SVP, Global Sales and Marketing Doug Fox – VP, IR.

Brian Drab – William Blair & Company Paul Coster – J.P. Morgan Securities, Inc Keith Housum – Northcoast Research Michael Kim – Imperial Capital, LLC Greg Halter – Great Lakes Review Andrew Spinola – Wells Fargo Securities, LLC.

Good morning and welcome to the Zebra Technologies 2014 First Quarter Earnings Release Conference Call. Joining us from Zebra Technologies are Anders Gustafsson, CEO; Mike Smiley, CFO; Mike Terzich, Senior Vice President, Global Sales and Marketing and Doug Fox, Vice President of Investor Relations.

All lines will be in a listen-only mode until after today's presentation. (Operator Instructions). At the request of Zebra Technologies, this conference call is being recorded. Should anyone have any objections, please disconnect at this time. At this time, I would now like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin..

Thank you. Good morning. Thank you for joining us today. Certain statements made on this call will relate to future events or circumstances and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995.

Words such as expect, believe, and anticipate are a few examples of words identifying a forward-looking statement. Forward-looking information is subject to various risks and uncertainties, which could significantly affect expected results.

Risk factors were noted in the news release we issued this morning and are also described in Zebra’s latest 10-K which is on file with the SEC. Now, let me turn the call over to Anders Gustafsson for some brief opening remarks..

Thank you, Doug and good morning everyone. I'm pleased to report that Zebra achieved record first quarter sales of $284 million and earnings of $0.82 per share including acquisition costs that reduced earnings by $0.09 per share. Earnings per share increased 78% year-over-year on sales growth of 22%.

All geographic regions contributed to the sales growth. Improvements in large enterprise deals and the incremental contribution from the Hart Systems acquisition drove record sales in North America. In Europe, more sustained economic growth in the UK, Germany and other large countries helped us achieve record sales in this region as well.

Overall, the record results also reflect sharp execution of an effective business strategy and broad based strength across our diverse business. For the quarter, the improvement in large deal activity complimented an ongoing strong run rate business through distribution partners. Sales were robust across all product lines.

The notable increase in service and software revenues reflects the impact of our acquisition of Hart in December. We also saw improving profitability as our gross margin exceeded 51%. The growth in sales improved gross margin and leverage on operating expenses contributed to first quarter free cash flow of $47 million.

As most of you are aware, a few weeks ago we announced our definitive agreement to acquire Motorola Solutions, Enterprise business excluding iDEN. Zebra gives fiscal assets a digital voice to drive business value; this is what we refer to as Enterprise Asset Intelligence.

This transaction will create the largest player in Enterprise Asset Intelligence, while complementing and accelerating Zebra's transformation into company that provides the necessary building blocks for truly smart enterprise, in this Internet of Things world.

The initial response to the amount spend from customers, channel partners and employees has been overwhelmingly positive.

We further believe the combination of the two leading companies in our industry will create the highly appealing financial proposition for our shareholders from our increased scale significant synergies and greater participation in attractive secular trends. Now more than ever, we believe Zebra is well positioned to extend our industry leadership.

Let me now highlight some areas of progress into first quarter. Product innovation remains a corner stone of Zebra's strategy. We continue to have a strong cadence of product introductions enhancing our value proposition with customers in targeted industries.

During the quarter, we expanded the capabilities of our Zatar platform with the ability to integrate iBeacon technology to customize in-store displays.

We also recently announced our first commercial agreement within important reseller to take advantage of the platform to offer their customers a new range of services and we are now working with a strategic healthcare partner, which is using Zatar to remotely manage and support printers through cloud based infrastructure as well as to manage our RFID tagged pharmacy trace within hospital.

This week, we are excited to be announcing a great leap forward in innovation with our new ZT400 family of mid-range table top printers. Designed for maximum feature flexibility, the ZT400 is easier to integrate with best in class connectivity options.

It gives customers faster print speed and quality and it is easily configurable for connectivity, communications and media handling to address a broad range of applications including RFID. With Link-OS and NFC communications, the ZT400 will be easier to manage over the cloud and obtain powerful web-based support.

From the vertical perspective, we will soon be introducing the QLn healthcare solution series. This innovative mobile printers expand the capabilities of our popular QLn mobile printers to ensure patient safety and lower the risk of specimen mislabeling. The printers meet National Specimen Labeling standards, among several innovative features.

They're built with disinfectant-ready plastics that allow healthcare workers to safely and easily clean the printers to reduce contamination risk. During the first quarter, we also advanced activities to further penetrate the existing market, we serve.

In North America, we had record sales for the third consecutive quarter with further improvements in large enterprise deals and a steady high run rate business. Printer shipments to strategic accounts in retail and small package delivery were particularly strong as customers refresh a legacy product and implemented new applications.

The improved pace of large deal activity has continued and the business pipeline is strong going into the second quarter. For the quarter, Hart Systems generated incremental revenue of $12 million substantially only North America.

The acquisition of Hart holsters our leadership within retail and serves to address vital customer needs in the rapidly changing retail business environment. In EMEA, the continued improvement in the Euro zone economy contributed to our record sales performance in this region.

Nearly all sub-regions experienced year-over-year growth with particularly strong demand in the UK, Germany, The Nordics and Spain. With a solid number of smaller deals, product shipments were notably strong to customers and retail, postal and rail.

We also had robust growth in healthcare with thermal wristbands helping to support strong growth in supplies. Looking ahead, we have improved confidence in our email business based on the continued strong deal pipeline.

In Latin America, sales increased to 11% driven primarily by solid run rate activity continued challenges in Argentina and Venezuela, were more than offset by strength and other parts of the regions. In addition to the strong run rate business, we had continued success with the deployment of card printers.

Our supplies business was also strong supporting manufacturing customers in Mexico. Finally, in Asia-Pacific sales were up a solid 15% with broad strength in the region. We had robust shipments to retail customers in Australia. Further manufacturing heavy in Korea, contributed to growth in the region.

As did growth in shipments to customers in China during traditionally slower period because of the Chinese New Year. We expect the positive business momentum to continue in the second quarter.

Overall, Zebra's record first quarter results demonstrated continued improvement in business conditions and a strong global demand for our products and solutions. Our commitment to innovation enable Zebra to help our customers gain greater visibility in to the extended value changes, to improve critical business processes.

Our deeper engagements with customers across industries and geographies coupled with our recently announced agreement to acquire the enterprise business of Motorola will enable Zebra to play a greater role in the important trends of Enterprise Asset Intelligence and mobility.

Now our CFO, Mike Smiley will provide a detail revive of first quarter results and guidance for the second quarter of 2014. After Mike's remarks, I'll return for some brief and closing comments..

Thank you, Anders. Let me highlight some of the key components of Zebra's first quarter results. First we had record sales with increases in all four geographic reasons. Second; operating leverage enabled EPS growth of 78% and third Hart performed strong in line with our expectations. Before reviewing our financial performance for the first quarter.

Let me quickly review the details of a recent announcement to acquire the enterprise business for Motorola. As a reminder, we are not acquiring the iDEN.

The purchase price of the transaction is $3.45 billion in cash which represents a multiple for the business we are buying of approximately 10.9 times adjusted EBITDA for the 12 months ended March 31, 2014 or 8.3 times EBITDA when you include expected synergies estimated at $100 million.

We intend to fund this transaction through a combination of $3.25 billion of new debt and $200 million of cash on hand. As structured, the transactional make efficient use of our offshore cash holdings. Now let's take a look, at sales performance for the first quarter.

For the quarter, sales increased 22% from $237 million last year to a record $288 million. On organic basis, sales increased 17%. Foreign exchange had a positive impact on sale of approximately $3 million net of hedges year-over-year. Sales for North America increased to a record $133 million up from 29% a year ago.

In addition to the impact from Hart Systems, the result reflects strong growth in hardware with mobile printers performing best. We also had growth in desktop and table top printers. Sales on an organic basis exclusive of Hart, were up also 17%. In EMEA, sales increased 18% also to a new record.

Nearly, all of our 13 sub-regions had year-over-year growth. The region had strong growth and retail, postal and rail in addition to healthcare with strong growth in thermal wristbands.

In Latin America, sales increased 11% higher shipments to customers in Mexico and Brazil, offset ongoing weakness in Argentina and Venezuela from the economic and political challenge in those countries. In Asia Pacific sales increased 15% with growth in nearly every sub-region with notable shipments to customers and retail manufacturing.

Underscoring the diversity of Zebra's business by product category, sales of hardware increased 18% and supplies advanced 11%. Services and software revenue grew 123% which reflects the impact of the revenues from the Hart Systems acquisition resulting in organic growth of 22%. For the first quarter, gross margin was 51.3% up from 47.7% a year ago.

The higher gross margin reflects the impact of higher sales, a reduction in freight cost and the positive contribution of the operations of Hart. Now that hedge is favorable, currency movements increased first quarter gross profit by roughly $2 million year-over-year.

Sales and marketing engineering and administrative expenses increased 8% from a year ago. The growth is primarily related to higher employee related expenses an increased expenses for outside professional services. Hart account for approximately $1.9 million of the $6 million of year-over-year growth.

The operating expenses which are up 11% over a year ago included about $5 million in acquisition cost. The increase in acquisition cost was principally associated with the company's agreement to acquire the enterprise business of Motorola.

Quarterly operating income of $53 million plus depreciation and amortization of $9 million and $5 million of acquisition exit and restructuring cost totaled $68 million of adjusted EBITDA. This compares with $38 million in adjusted EBITDA for the prior year quarter. As a result of the announced acquisition.

We've started to present adjusted EBITDA in our press release. We believe this measure will help investor better understand the fundamental performance of our business. The effective income tax rate for the first quarter was 22.3%. The rate reflects the impact of approximately $4 million of acquisition cost to not deductible for tax purposes.

Earnings totaled $0.82 per share including a reduction of $0.09 per share for acquisition expenses on 51 million average shares outstanding. At the end of the first quarter, we had 50.5 million shares outstanding. Financial results for the first quarter 2013 included exit acquisition and restructuring cost of $0.04 per share.

For the first quarter inventories decreased $1.7 million from the fourth quarter. Inventory turns increased from 4.1 times for the fourth quarter to 4.7 times. Net receivables were up $4.7 million from the fourth quarter. The day sales outstanding declined from 65 days to 56 days.

We entered the period with $468 million of cash in investments with approximately 60% held in foreign accounts, all of which are invested in US Dollar denominated securities. Now let's look at our 2014 second quarter forecast.

We were forecasting second quarter sales in the range of $280 million to $290 million which represents an increase of approximately 13% year-over-year. The forecast reflects the company's historical, seasonal increase in the printer and supplies business offset by the typical sequential declining revenues from Hart Systems.

Second quarter earnings are expected in the range of $0.74 to $0.84 per share excluding acquisition cost of 25% from last year's EPS of $0.60 per share excluding $0.03 per share of exit restructuring cost. Our forecast assumes that consolidated gross margin in the range of 48.5% to 49.5%.

Also reflecting the seasonal lower contribution from Hart Systems. Operating expenses for the second quarter are forecasted between $88 million and $90 million excluding acquisition expenses. The forecast also assumes an effective income tax rate of 20%. That concludes my formal remarks. Thank for your attention.

Now here's Anders for some concluding comments..

Thank you, Mike. Zebra's strong first quarter results demonstrate the success of our strategies to drive profitable growth. Our investments in product innovation, emerging technologies, channel development and geographic expansion of making Zebra more strategic to more customers in new ways.

Our business diversity, the global strength of the Zebra brand a sustainable competitive advantages we continue to possess, would enable us to extend our industry leadership. We see multiple avenues for growth and high returns, as we diversify and expand our business to leverage opportunities from emerging technology trends.

Through the acquisition of Motorola's Enterprise business. We will have the ability to offer smart solutions, enabling companies to identify, track and manage their assets, transactions and people.

These emerging technologies include data sensing, tracking and capturing devices that transmission of those resulting data streams via a secure wireless and wireline network, flexible cloud based application platforms and big data analytics to mind the data streams for actionable business insights.

Looking ahead, the new Zebra will be a clear leader at the forefront of innovation in Enterprise Asset Intelligence Solutions. With an extensive R&D platform and a significant patent portfolio.

Our expertise in RFID technologies now with enterprise computing, scanning, specialty printing, wireless LAN and location solutions will not only give us scale in procurement, manufacturing and logistics. It will vastly expand our distribution reach and deepen our network of value added channel partners.

All of this will come together, within a global organization that has a deep history of well established brands and innovation. Finally, the great diversity of our business.

Our financial strength and continued industry leadership provide us the resiliency to pursue multiple growth opportunities and our recent investments are critical high return activities that helps Zebra penetrate existing markets more deeply, as well as expand our presence in new exciting areas of growth.

All of this gives us great confidence and optimism in Zebra's future. Thank you for your attention today. We look forward to providing you with regular updates on our progress through 2014. I would now like to turn the call back to Doug for Q&A..

Thank you, Anders. Before we open the call to your questions, let me ask that you limit yourself to one question and one follow-up. In addition Mike and I will be available after the call for any further discussions..

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And we have Ryan Treff from William Blair in line for question. Please go ahead..

Good morning, this is Brian Drab.

How are you?.

Good..

Good, just Mike really quickly to clarify you said 22% organic revenue growth and I missed what that was for – was that for software segment?.

That was for – the difference would be for Hart. So we had about $12 million of revenue for Hart that we didn't have a year ago..

Right. Okay, so $12 million and so the growth in North America of 29% given Hart is, I guess it's about 90% in North America. Maybe more the – you had high-teen, maybe 17%, 18%, organic revenue growth in North America..

17%..

Okay, sorry if I missed that. Okay, 17% so very strong organic revenue growth rate and I'm trying to just drill down into. If you look at the first three quarters of last year with average of around 2% revenue growth in North America. You've talked about the step up in large deal activity but also step up in the run rate business.

You mentioned small package industry is going through a refresh cycle. Can you just talk about what's driving that refresh cycle, is it really focused on in one industry or is it more broad and are you seeing more, is a proportion of sales.

Are you seeing more large deal impact than you did last year?.

I'll take the first part of that and then I'll hand it over Mike Terzich for that follow-up. So Q1 was a very good quarter for us overall in North America, with a strong run rate business, but it was very much complimented by large deal activity, which have has really ramped up over the last three quarters for us.

North America is the most diverse region we have, so from a vertical perspective. We saw particular strength in retail, T&L and healthcare and when we look forward. I guess, we've – we see more of the same. We have good momentum in the business today.

The pipeline for large deal continues to look very healthy and the run rate is performing very well also. So now, Mike Terzich..

Okay, Brian. Just a couple added points what Anders articulated here. In North America we enjoyed a particularly strong quarter in the retail, the large deal activity has come back. I think retail has been somewhat on the sidelines over the last couple of years.

there's a been a lot, a lot of stuff going on in the retail dynamics from a project perspective, but there's a quite a few projects that have been put back into play. Healthcare as Anders noted and I think the other piece to this is. Historically, we've been seeing some refresh rates in North America.

This is probably been the market, where when you go back 2008, 2009. When things kind of reset after the economic challenges of that period. North America was still the one market that I think has been a little absent some of those refresh cycle.

We may have actually the refresh cycle at some point and we are seeing a surge that's supporting that run rate business. So we've got the best of both worlds right now.

We've got the return of large deal activity principally centered and retail in some of the T&L space combined with a strong refresh run rate through the traditional distribution channel..

Okay, thanks very much..

And we have Paul Coster with J.P. Morgan in line with a question. Please go ahead..

Yes, thanks very much appreciate you taking the questions. I just want to sort of follow through on Brian's questions here. The visibility seems to be improving which obviously is a result of this bigger deal.

So the bigger deal, are there more deals, are they bigger and are they also very sort of more extended timeline? Plus can you give us a some sense of all three of those metrics and how they're evolving?.

So specifically for North America, we have I guess as all of those, we have more large deals. They have become somewhat larger or the average is probably similar to what it was before, but we have probably have a few more larger deals and some of those larger deals, do spend more than one quarter..

Now that you generally sort of taking the products off the shelf or is there any sort of project, so they're not occurring through revenue associated with these, that helps you sort of maybe there is some cost attached to it but it gives you even more confidence around the timeline because you know what your project deliverables are?.

Most of our products in these larger deals use more standard products, but we do have more custom software applications to be put on them, so there's some specific things for communications or integrations or other things to make them more easily integrate into our customer's networks.

So we do have some of that, but there's a pretty light touch for the most part, as far as how much customization we do on our products..

Okay, last question on Hart. Can you talk just little bit about the growth opportunity.

There is, is it international or is it sort of cross-selling into your existing US base or is it both any color, that would be helpful?.

Just a little bit of refresher, then I'll turn back to Anders to talk about just as a basically half of Hart's revenue comes in the first quarter of the year so, as we go forward Hart will become less significant in quarters two through four, but this being sort of significant.

We called it out a little bit more in our call and I think Anders can talk a little bit about the growth opportunities..

I think there is lots of growth opportunities in North America and in the international markets. So the market share of Hart's approach of more of a self-service inventory solution is still pretty low.

So there's lots of opportunities to go after the more traditional heavier workforce implementations that most retailers use and there's been good progress on couple of nice wins in the first quarter and some good pilots that they're doing.

If you think just about, the whole omni-channel activity for instance that's a big driver for having greater inventory accuracy. So more and more retailers are looking to be able to ship customer's orders, customer request from any store or from any warehouse.

So having then, when you're taking a order and do that you've got to have more confidence that you have accurate view of your in-store inventory or warehouse inventory. So that's something that's Hart very much helps retailers do. So I see this as a market which is still very low penetration and it plays to some strong secular trends in retail..

And we have Keith Housum from Northcoast in the line with a question. Please go ahead..

Thanks, gentlemen I appreciate you taking the call and great quarters -- quarter. As we look at the growth, hardware had a fantastic quarter year-over-year.

You find a little bit more color on, is that growth coming from the refresh cycle or perhaps a bit color on new verticals that you guys are in or expanded product entries, got new business this cycle or perhaps you didn't have, the last year or even last refresh cycle that we saw..

The strength in the hardware business. First I'd say, I'll give the [into] and I'll hand over to Mike Terzich again. I'll say the strength in the hardware business broad based.

Cleary the refresh cycle is giving an extra boost to it, refresh is printer-centric, it is very hardware-centric but it comes from refreshes, it comes from the work we've done to penetrate new vertical like healthcare, partial deliveries in Asia-Pacific.

Lots of things that have contributed to it, but for the quarter I would say large deal activity was made with the largest single contributor to the increase.

Mike, any further thoughts?.

Okay, Keith. Yes, I think I would say the characterization the hardware performance kind of goes back to some of the prepared comments that Anders made earlier which is, we are really enjoying the diversity of our business. When you look at geographic diversity and you look at the vertical market diversity. It's really playing very favorably for us.

So we are enjoying the large deal activities that have been primarily associated with the retail and the T&L space. We are seeing refresh which is been driven in multiple geographies. Asia is a big manufacturing corridor for us now. So we are enjoying refresh in Europe and in Asia and even in North America some of the warehousing applications.

We are seeing some refresh on some of the heavier side of our hardware business. And we are getting the emerging growth opportunities that are coming up from the spaces like healthcare and we've obviously got some purposely built design products that are going to be entering that space.

We are starting to see some hardware demand even in those emerging verticals. So it's diversity that's really working for us across the business right now..

I appreciate that and then if I can just drill down, hi for Michael Smiley just drill down on gross margin of the quarter. You know obviously Hart was contributor and [freight] cost, I'm trying to understand a little bit more about the Hart business.

Whether it'd be safe to assume that maybe the – increase in the gross margin was 50% attributable to Hart or is that for us too little, too small?.

I'm sorry are you saying 50% of the gross margin, explain that again?.

Yes, gross margin improvement compared to last year. With that 50% improvement [indiscernible] for the Hart..

Well, I don't know that it'd be 50%, but I can tell you the gross margin. Again we had about roughly $12 million of revenue from Hart. The gross margin on Hart is meaningfully higher than the company average. So on $12 million it helps, it doesn't certainly explain everything. We also had the higher volumes.

We are able to spread more of our overhead over greater number of units, so I would call that better absorption. I will also say, our operations team basically hit on all cylinders this quarter really performing extremely well. They've been investing a fair amount of time and energy in projects that help us to run that part of the business better.

We are not planning for exceptional performance every quarter and I think our second quarter gross margin forecast sort of gives ourselves something a little bit closer to the average, but we certainly performed extremely well in the first quarter and the other piece is obviously benefitted a little bit from foreign exchange.

So those of you, Hart better absorption lower overhead and then foreign exchange or it's sort of the four primary drivers that we point to..

But Hart will be a little less than it would not be as much as 50% at a gross margin that is less than that..

Yes.

Got it, all right. Appreciate it. Thank you..

And the next question comes from Michael Kim from Imperial Capital. Please go ahead..

When you're thinking at your sales pipeline? How you continue to see the hardware makes is broad based, do you see opportunities driven by either geographic or vertical opportunities and how you see as these margins trending, given that pipeline?.

So I'll start again and then ask Mike to provide some more detail color, but I think similar to – how we answered the previous question. The diversity of our business is really helping us. We are seeing strong performance, strong pipeline for I will say all regions and all verticals. So this is not a one vertical, one region type of thing.

This is very much demonstrating, the broad strength of our business. The price points and margin outlook we have, I think our business tend to be quite steady. We are very disciplined in our pricing approach. So we don't expect that to be any material difference in pricing or margins based on the larger deals..

Mike, just a couple other points on this.

I would say that, we have certainly within the business, we have put a lot of focus emphasis on improving our large deal pipeline from a visibility and a from a validity perspective and that is been an internal initiative that is really starting to pay more dividends in our confidence to look into the pending quarter and gain some confidence on what's transpiring.

And I think along the lines the larger deal opportunities for us, tend to be oriented towards our mobile printer devices and to a lesser extent on some of our desktop product range and some of our card printing product ranges. So to agree that, we see more activity in that space.

They generally comes from a mix of our product that is away from some of the traditional big iron, higher margin product but we have been able to offset that to Mike's point by all the good work we've been doing on the supply chain side and getting scale out of a lot of our electronic design architecture..

Great and then when you think the refresh cycle and the new products and improving in EMEA.

How are you guys thinking about balancing investments versus the operating leverage that you saw in the quarter, just given all the opportunities that you're seeing in the pipeline?.

We are obviously carefully assessing balance our investments versus in the business versus kind of profitability, but first and foremost we want to make sure we invest in our core business to make sure, we can continue to extend our leadership position in industry.

We think that generates lots of long-term benefits for the business as far as having product leadership, getting the market share and the scale benefits. So that is very important to us, but we're obviously mindful that we also need to deliver healthy returns to our shareholders.

So at the moment, I feel we've been able to strike a fairly good balance in that respect..

Obviously with the pending acquisitions with Motorola's Solutions enterprise business.

Are you already in your planning process of integrating that organization with your investment spend on either R&D or your selling marketing activities?.

Well it's probably a little early to start talking about the specific investment profiles, different parts of the organization will have, but from an integration perspective I feel we're where we expect to be being three weeks into this transaction, actually it's three weeks today since we announced it, right? The point of Mike Terzich was on the phone to be the Lead Integration Officer, he has very good experience – long experience with us obviously and but also been the champion for our relationship with Motorola for many years.

We've started to ramp all the activities around – integration management office. We've had a number of meetings with our combined teams [indiscernible]. We've identified the functional team leaders toward the different work streams that we have to perform.

We are largely done populating those teams with the individuals, who will do the work and we are now in the process of scoping – the actual work streams all the things we have to do there. So early in the process, but I feel good about where we are.

I think we are on target and I would say also since we have had such long history with Motorola and it's very complimentary solution set. The working teams are – they know each other well.

There's lot of comfort with getting along, so I would say it's -- all the working teams are getting along very well and working well together based on having a good familiarity with each other. And Mike, maybe a few extra words from you..

No, I think it's pretty much in line, I think where we need to be at this stage. We've been very complimentary selling at different ends of the solution spectrum.

So it's a very friendly acquisition so to speak and so we've got very high [spree to core] with the work teams, but the heavy lifting is really just beginning, but we feel we put the best our best people in charge of some key work streams and we are marching towards a flawless day one, close..

Terrific, well good luck with that and thank you very much..

And we have Greg Halter from Great Lakes Review in line with a question. Please go ahead..

Thank you and congrats on the excellent results..

Thank you..

I wonder, if you could detail your large customers in the quarter.

I think there has been three of them, there have been three of them and also how that dynamic may change once the acquisition is consummated?.

Mike this is Smiley. By the way, so when you look at it again the three large customers I think you're referring to our distributors and when you sort of add the three up, they're about the same percentage sales for the top three about the same as they were a year ago. Although, there has been some mix change between them.

I don't know, if you want me your color going..

Maybe, Mike T you want to?.

Well, I think that's exactly right. I mean the three largest our distributors and we are pretty confident that when we close on the transaction, the three largest will remain those distributors. I don't think necessarily it will change, who is represented in that list.

We will clearly become a large piece of business to those respective distributors and that certainly worth noting, I think from our perspective those are important relationships, they've been important relationships to both Motorola and to Zebra and we don't envision that's going to change.

We are excited about the opportunity to leverage the combined businesses and put forth, what we think will be ultimately a very exciting channel program and channel proposition that'll just further cement opportunities for us in the broader market..

I would just add also that, we've obviously spoken at length with our these three distributors but also many other resellers and the feedback we've had been very, very positive.

People see this as, a great combination that will drive some more innovation in the industry will reinvigorate the industry to some degree and people will be very, very supportive of the transaction and not expressed any particular concerns..

Okay, sounds good and then on the guidance.

The EPS guidance, Mike that you provided the $0.74 to $0.84 is that including or excluding costs?.

It includes most costs, but its excluding the acquisition exit restructuring that we normally exclude, when we quote our number..

What do you envision that amount to be?.

Well that's a number, we announced the transaction three weeks ago and so we are putting that together right now.

We really don't have as good a visibility into that as we need as we're trying to put together the right teams and resource, to make sure we're effective, so we are working through that right now, we don't have any better color to give you..

We have been trying to make sure, focus on getting the integration down right and make sure the teams have, feel that they can get the right type of resources and advisors to augment both competencies and just the strength of the teams. So you don't want to be pennywise and pound foolish here.

So we want to make sure, we do this right and get the right outcome and can be getting off to a very good start, when we do close the transaction..

Okay, but there is no other exit acquisition or restructuring cost from Hart or any other transactions in that number?.

Not of any consequence..

Okay, thank you..

(Operator Instructions) and we have Andrew Spinola, Wells Fargo on line, with a question. Please go ahead..

Thank you.

Mike T, made the comment before the Zebra and Motorola are sort of opposite ends of one solution to the enterprise market knowing that, it seems somewhat surprising that there is such a big gap between the growth rate in your hardware business up 18% year-over-year and Motorola down 1% [Exide] and I'm just wondering how you reconcile those differences and how you think about, how these two businesses are sort of executing market share gains and losses and how that all plays into your guidance to 4% to 5% going forward?.

So first I think that, we believe there are significant opportunities for the combined business. We've had great response from all stakeholders I would say that customers who will ultimately determine the success of the combination. We do have early indications of our thesis that we will have more relevance with CIOs.

We can now provide broader solutions. We will have largest spend and be more strategic, more important to them. We see great opportunities for cross-selling our solutions particularly so in diversity market side where we are very strong in healthcare and manufacturing.

We believe, we can pull in some Motorola Solutions there and Motorola is very strong in retail and T&L and can help us in that area. I think there's a few things that, I believe have held back growth on the enterprise side.

I think the Microsoft OS issues appear to be irritant to customers I guess, the Microsoft have been somewhat vague in expressing or specifying what the roadmap for their operating systems look like in the future, but Motorola has made a strong commitment to Android, which I think is playing out very well for the more so and expands the market quite a bit.

The Motorola business has also been quite cyclical like ours.

But I think we got out of our cyclical downturn, a little earlier but I believe that they are coming out of their downturn also and we did a lot of work in between, while we were going to do due diligence on the transaction to really understand and get comfortable with what the underlying growth rate for the industry was, Motorola's competitive positioning, the risk of customer device encroachment and all of those things baked together.

We concluded, we should be able to achieve a growth rate, longer term growth rate to 4% to 5% and I think also when we look at the longer term. There is certainly a number of very attractive secular trends that I think will support the business. Mobility being probably the most prominent one, we ever think we have a strong mobility play.

Motorola is really all about mobility. All companies are trying to make their employees and workers more mobile, less tethered but also they need to have the right tools to drive the productivity in the field. So we're very much in place to what we do, they have Internet of Things.

We are generating a lot of real-time data that was actually happening our customers in operations.

Be that retail store or assembly line o healthcare facility and enabling our customers to take advantage of that and drive that into more so cloud computing and if you look at, if you move a worker from being to an office employee to field worker, you need to also then to said drive the same level of tools and other things to enable and to be productive.

And what happens then as you start migrating your desktop applications to the cloud and have the user interface on a mobile device. So we see a lot of opportunities for us to be able to drive growth and continue to make this a very accretive business..

Thanks, that's very helpful. Just changing directions a little bit on the supplies business.

I had thought that business might slowdown a little in Q4, after you annualized LaserBand acquisition but yet you've grown double digits in both Q4 and Q1 and I'm wondering, do you think about that business, is having that type of growth profile going forward and how much is it all coming out all of healthcare or what kind of color can you give us on, how to think about that business and what's driving growth?.

I'll start and then I'll Mike T, to provide some further color here. This is -- first I guess we have the supplies business, the supplies market place is a huge market place much, much larger than the barcode printer market space and we have a very low market share.

So for us, we are still just scratching the surfaces as to where we are from a market share perspective. So we are one of the largest market share player, but it is a very, very fragmented industry.

So what we have done internally, I will say apart from the LaserBand acquisition, as we have to put lot more emphasis and focus on driving supplies, revenues. I think our sales teams today see that the only way for them to really make their numbers is to also sell supplies. They see that as being very additive part of our portfolio to their quote us.

So we are managing at, more differently I guess we are putting much more focus and emphasis on it, then we saw did some years back probably and maybe with that, Mike you can add a couple of comments?.

Just a couple more Andrew. It's really – it's really a gem of a business for us and to Andrews point. Our focus has been in the specialty media spaces where the customers are marking, tagging a variety of critical assets.

Those could be as basic as patients in a hospital, but they could be very high priced assets in a supply chain and it really speaks to the growing opportunity in big data and some of that insight that we are helping customers drive through their value and their supply chain. So we tend to play in the higher margin specialty space.

It's less competitive to Anders point it's a very large market but there is a big cross section of the market that is plain paper labels going on cardboard boxes, which is very competitive and the label has to last the life of the parcel ship and that's not where want to play, we want to play on the high-end specialty where the information and the ability to read that information multiple times and sometimes over multiple years becomes of high value and that has allowed us to kind of separate ourselves from a lot of the commodity players.

We have the financial strength to carry a lot of this high-end raw material. In inventory and convert that, specifically to a customer and then we've been able to that by expanding our converting locations and getting closer to that customer base and the Zebra brand is actually a very relevant piece to that equation.

So it's been, we've been clearly outperforming the broader supplies markets we've been taking share and we really like the way, we are positioned in that business..

This is Mike Smiley one last comment. I think, one reason I like this business, this is the fairly stable almost like an annuity type business, which again supports the stability of our cash flows that does makes, one of the reasons makes Zebra feel very attractive or be very attractive..

That's great, thanks very much..

And we have no further questions at this time. I'll now turn the call back over to Doug Fox, for closing remarks..

Thank you and again thank you for joining us today. I want to let you know that our next regularly scheduled quarterly call will be on August 6 and with that on behalf of the Zebra Management team. Thank you for joining us today..

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, you may now disconnect..