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

Andrew Spinola - Wells Fargo Tim Mulrooney -William Blair Paul Coster - JPMorgan Keith Housum - Northcoast Research Michael Kim - Imperial Capital Jason Rodgers - Great Lakes Review.

Good morning and welcome to the Zebra Technologies Third Quarter 2014 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. Instructions will be given at that time in order to ask a question. 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..

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 15% sales growth to a record $303 million for Zebra's third quarter on record sales across all geographic regions and multiple product lines.

High pipeline activity throughout the quarter generated several large deals in particular to customers in retail and small package delivery, a consistent and robust run rate business also continued throughout the period. Non-GAAP net income of $0.93 per share increased 21% from $0.77 per share for the third quarter of 2013.

Zebra's short operational execution against a proven growth strategy generated share gains, strong relationships with strategic customers and targeted industries and more innovative solutions that deliver improved asset visibility.

Continued strong execution in healthy business environment was also reflected in the enterprise business that we acquired from Motorola Solutions on October 27. Third quarter sales for the enterprise business were up 2% from a year ago and a sharp 8% from the second quarter of 2014. Our positive momentum gives us great optimism for Zebra's future.

The combination of the enterprise businesses deep capabilities in data capture, mobility, wireless and services together with Zebra's industry leading tracking and monitoring solutions provide the combined entity with a key building blocks for Internet of things solutions in a category we call Enterprise Asset Intelligence.

Our innovative offerings, we provide organizations with the tools they need to gather and share real-time information about their critical assets. Our efforts are supported by a superior global go to market channels, leading global brands and the most talented people in the industry. Let me now provide some third quarter highlights.

Zebra's consistent investment in core sales and marketing activities resulted in double-digit growth in three of our four geographic regions. More customers in targeted verticals turned to Zebra for products and solutions that offer greater visibility into their business operations.

In North America, record distribution sales and further growth in shipments of large deals supported our second consecutive quarter of 16% sales growth. During the quarter, we had a surge in shipments of mobile printers to retail customers in advance of the fourth quarter holiday season.

We also had notable shipments of desktop and tabletop printers to customers in small package delivery. Sales to government customers supporting key supply chain applications also strengthened.

Demand in the fourth quarter remained strong and the pipeline of new business is healthy as we developed deeper more enduring relationships with strategic accounts in the region. Positive trends also continued for locations solutions. Our MotionWorks Sport Solution is now up and running in 17 NFL stadiums.

Since the announcement at the end of July, we have received a large number of qualified leads from companies across multiple industries interested in exploring how real-time location solutions can help them gain greater insight into their enterprise operations. We also experienced improving shipments to industrial and retail customers.

We increasingly see the value of active RFID solutions for asset location and motion management. EMEA's sales growth of 19%, the highest of any region this quarter occurred in the seasonally slowest period for the geography. Product performance was strong across the portfolio.

The quarter included shipments of mobile and desktop printers in part due to deeper penetration of the postal and parcel market. We also had favorable shipments of products to retail customers.

More effective geographic coverage and improved penetration of second tier distribution partners are both important contributing factors to increasing strength and gaining share in the region.

During the quarter, we also had notable shipments of card printers for national insurance card program in Ghana and strong sales of wristbands for improved patients' identification.

While mindful of recent economic news in the region, we are optimistic about the fourth quarter for EMEA given a strong beginning backlog, a growing pipeline and a growing number of large deal opportunities. In Latin America, sales growth of 11% benefited from improved geographic coverage and large shipments of products to retail customers.

The breadth of sales in the region also included shipments of card printers to financial institutions for on-demand credit card printing as well as to motor vehicle agencies for driver's licenses. During the quarter, we closed mobile printer deals for transportation and direct store delivery applications.

Sales in Asia Pacific were up a solid 9% as our planning, strategy and strong execution led to a more diversified business across multiple dimensions. Focused sales resources in China led to high growth of mission critical table top printers to manufacturers.

We also had increasing success in transportation and logistics with our printers designed specifically for emerging markets. We were pleased with card printer sales for social security applications in China as well as continued support of voter registration activity in India.

Like many large deployments, Zebra products proved to be the performance winner against competitive offerings. Innovative products and solutions a proven growth strategy and a continued focus on operational excellence remain a critical combination to Zebra's enduring success.

Our results for the third quarter demonstrate Zebra's ongoing ability to extend leadership in an attractive industry. Our combination with the enterprise business makes us an even more potent force offering a more comprehensive product line with the ability to deliver innovative end-to-end solutions to our customers.

Now, our CFO Mike Smiley will provide a detailed review of third quarter results and guidance for the fourth quarter of 2014. After Mike's remarks, I will return for some brief closing comments about Zebra as we look towards 2015 and our integration of the Enterprise business..

Thank you, Andres. First, please note that my comments refer primarily to non-GAAP financial results, which we have provided in the press release we issued today. Let me highlight some of the key components of Zebra's third quarter results. First, strong organic growth led to record sales in all four geographic regions and multiple product lines.

Second, we sustained high gross margins in operating profitability. And third, adjusted EBITDA increased by 28%. Let's take a look at sales performance. For the quarter, sales increased 15% from $264 million last year to a record $303 million.

On an organic basis, sales increased 13.2% with Hart contributing $4.9 million to the quarter a solid result for this business. Foreign exchange had a positive impact on sales of approximately $2.9 million net of hedges year-over-year. Sales for North America increased 16% to a record $134 million.

Strong growth across multiple product lines resulted from record shipments or distribution in addition to robust activity with large customers. In EMEA sales increased 19% to a new record $94 million with growth in 10 out of 13 sub-regions particularly strong growth occurred in Germany, the U.K.

and Italy during the period that normally experiences a seasonal slowdown. Several large deals supplemented strong growth through distribution partners. Latin American sales increased 11%, strength in Mexico and other parts of Latin America more than made up for weakness in Brazil.

In Asia Pacific, 9% growth also led to a record with strong growth in those sub-regions. We continue to execute well on our business plan to build on our manufacturing base in the region with business in retail, transportation and logistics, healthcare and government.

By product category, hardware sales increased 16% with a record 405,000 printers unit shipped during the quarter. Supplied advanced 6% to an all time record including strong growth in Asia Pacific where we are building a solid base of business serving our customers with high quality Zebra branded products.

Services in software revenue growth of 39% reflects the impact of the revenues from the Hart Systems acquisition in addition to organic growth of 16%. We see services as a key area of growth post acquisitions we take advantage of the services infrastructure enterprise brings to the business.

Third quarter gross margin was 50% up from 48.8% a year ago, the higher product volume and lower inbound freight cost were the primary reasons for the increase. Net of hedges, favorable currency movements increased third quarter gross profit by approximately $1.7 million year-over-year.

Non-GAAP operating expenses of $89 million are within expectations. The growth is primarily related to higher incentive compensation and expenses from the Hart acquisition. GAAP operating expenses include $35 million in acquisition and integration costs.

The amount was principally for professional fees and integration activities supporting our work to prepare for the acquisition. Effective non-GAAP income tax rate for the third quarter was 23% an adjustment of $8.5 million from the GAAP income tax rate reflects an impact of a change in U.K. tax law.

We expect a reversal of this adjustment in the fourth quarter. For the quarter, non-GAAP net income totaled $0.93 per share up 21% from $0.77 per share for the third quarter of 2013. Quarterly adjusted EBITDA was $74 million or 25% of sales compared with $58 million or 22% of sales last year.

The third quarter inventories increased $13 million from the second quarter; we took advantage of lower cost ocean shipping. Inventory turns were effectively unchanged at 4.7x. Net receivables of $187 million were up $22 million from the second quarter reflecting the higher level and timing of business during the third quarter.

The days outstanding were 55 days compared to 56 days from the prior quarter. We entered the quarter with $542 million with cash in investments with approximately 60% held in foreign accounts all of which were invested in U.S. dollar denominated securities.

Subsequent to the end of the quarter, we liquidated substantially all of our foreign investments to help fund $3.45 billion enterprise acquisition. We now have $3.25 billion in debt on the balance sheet with a weighted average interest rate of 5.6%. Our starting leverage ratio is approximately 5x adjusted EBITDA.

We expect to reduce this debt burden to less than 3x within three years. Now, let's look at our 2014 fourth quarter forecast.

For the pre-transaction Zebra business, we expect sales in the range of $300 million to $310 million or up 7% from a year ago with ongoing favorable business conditions in all geographies, the sale comparison is against a very strong fourth quarter last year and the strong shipments of large deals that occurred in third quarter this year.

The mid-point of the guidance range would bring Zebra's sales growth for the full year to 14%. We expect gross margin within historical range of 48.5% to 49.5% which reflects the mix of business we expect for the period. Non-GAAP operating expenses are forecasted in the range of $90 million to $91 million.

This forecast brings pro forma operating income to $55 million to $63 million compared with $54.8 million from last year's fourth quarter. Our forecast assumes a steady U.S. dollar euro exchange rate at the current level. We expect interest expense of approximately $35 million for the quarter.

Looking at the enterprise business, we are encouraged by the improving trends in the business and the outlook for the fourth quarter. We expect the usual seasonal improvement with pro forma's sales for the fourth quarter in the range of $640 million to $660 million. This quarter represents a sequential increase to 7% from the third quarter.

The adoption of Zebra's revenue recognition policy and the potential impact of the first accounting, however, could have a significant affect on the reported number because of the timing of the acquisition, which occurred at the end of October, our consolidated financials for the fourth quarter of 2014 will incorporate two months of enterprise sales.

We estimate that 75% of sales will occur in the last two months of the quarter. The timing of the transaction in multiple post closed accounting adjustments makes it impractical to provide a reasonable accurate forecast for the full P&L.

During the 2014 fourth quarter conference call in February, we expect to provide the details Zebra historically gives for the combined entity. We have continued to maintain our policies solely providing quarterly guidance. That concludes my formal remarks. Now, here is Andres for some concluding comments..

Thank you, Mike. Zebra enters the fourth quarter with increasing confidence in the long-term profile of our new combined company. With a fuller complement of products and solutions, we will work towards building stronger customer relationships to make Zebra the first company CIOs turn to for their asset intelligence needs.

Now with more than 7000 dedicated employees, we have significantly expanded our geographic reach to provide even more opportunities to deliver Zebra products and solutions to our customers worldwide through the strongest go to market channels in the industry.

No other company has the scale and resources to deliver solutions that offer enterprise customers the real-time visibility into critical assets they need to make better business decisions. By the time of closing, we successfully completed a complex cut over to the ERP system supporting the enterprise business in a short amount of time.

Our hard work ahead of the close enabled us to take orders and ship products add volume from day one. We have already made significant progress on integrating the Enterprise business.

Shortly after our announcement of the acquisition in April, we established our integration management office to ensure a smooth transition for our customers and employees. We welcome all of our employees to the new Zebra and congratulate them for their hard work on integration planning while maintaining high performance levels in the business.

With the closing of the transaction, we have announced the new senior regional and global leadership of our organization. As part of this leadership we welcome Girish Rishi as our Senior Vice President of Enterprise Solutions and Tom Collins as our Senior Vice President of Supply Chain Operations both reporting to me.

Additional appointments include Joe Heel, our new Senior Vice President of Global Sales. Joe will play a key role in maximizing the value of the combined business to our customers and channel partners.

This appointment will allow Mike Terzich, our Chief Marketing Officer to focus his efforts on integration activities as Head of the Integration Management Office and building a global marketing organization another critical area for success.

For the two months remaining in 2014, we will operate as two distinct businesses from a sales perspective to ensure continuity for our customers. At the same time, we will be implementing plans to work towards operating as a single organization early in the first quarter of 2015.

We expect to announce, the next several tiers of the sales organization by year end. So we are ready to engage our customers as one company.

As we go to market as a combined organization, Zebra's historical focus on channel development together with enterprises strength in strategic account management will create significant multiple near term opportunities.

Many large customers have already expressed an interest to standardize on our combined solutions portfolio to reduce the inefficiency and cost of managing multiple vendors. We also have seen a strong initial interest in additional services given the large number of deployed devices from the combined company.

In addition, we will be accelerating a channel partner development followed by the introduction of a new integrated channel program in the second half of next year. Advisor councils of our channel partners that we formed earlier this year will work with us in creating the next generation of our award winning channel program.

Looking beyond the sales organization, we have identified staffing roles and areas of likely investment to fill gaps in certain functions. I'm excited about the progress we have made in outlining new organizational structures and implementing programs to effectively merge our corporate cultures.

We will continue to drive momentum and maximize the strength of the new Zebra as we create the most formidable provider of asset intelligence solutions worldwide. At the same time, we are committed to creating shareholder value through achieving $150 million in cost synergies.

We expect $100 million of these savings to be realized in operating expenses and $50 million in cost of goods as we streamline the purchasing of common components and rationalize vendors. Our current plan calls for exiting 2015 with $50 million to $75 million in captured synergies on a run rate basis with the remainder achieved the following year.

As a combined company, we now have the ability to discover additional sources of revenue and profit we will pursue these opportunities thoughtfully and deliberately in order to preserve and enhance customer relationships employee engagement and industry leadership.

While encouraged by the outlook for our business, we are also aware of the need to remain nimble to ensure that we quickly respond to evolving business conditions. The future for Zebra is bright.

No other company possesses the scale, resources or focus to deliver the vital solutions that enable our customers to gain greater visibility into their most critical assets. With enterprise we are now even better positioned to benefit from important technology trends in mobility, cloud and the Internet of things.

We will continue to work on introducing innovative products and solutions for greater enterprise asset intelligence while pursuing an operational excellence for the benefit of our customers, employees and shareholders. Thank you for your attention today. I would now like to turn the call back to Doug for Q&A..

Thank you, Andres. 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 our first question comes from Andrew Spinola from Wells Fargo. Please go ahead..

Thanks. I wonder if you could just comment on the Q3 Motorola results, they've obviously bounced back quite significantly from Q2. I think you are expecting a number of the impacts that impacted Q2 to sort of weigh on Q3.

And I'm just wondering if you could talk about how some of those one time issues might have weighed on Q3?.

The enterprise business was up 8% sequentially. We had strong growth in North America, Latin America and Europe but that was offset by a significant decline in Asia Pac. So some of the highlights I would draw your attention to will be several large wins of Android devices.

So this year, we have seen Android becoming a much stronger factor in the retail and T&L space. Hardware were actually grew by double digits in the quarter, so that was very nice sequentially. And we did see some of those operational issues that we highlighted three months back to subsidy.

So I would say, we saw a great sequential performance from Zion was up more than 50% still down year-over-year. But, that was big improvement. And the supply chain issues that we have experienced there I expect it will be completed resolved as we enter 2015.

We had other supply chain issues more largely around the introduction of new warehouse management systems for the distribution centers.

And I would say they were also largely resolving in the quarter and after we got over to the new ERP system as our integrated company now, we were up and running and shift in volume already at the end of last week – sorry, at the end of the first week. So I think that was a good testament to the integration activities there.

And lastly, in China, obviously, China has continued to perform poorly, but we worked with enterprise business or guided them to some activities to help stabilize the business particularly taking some channel management actions to improve relationships and other things there to position ourselves for growth as we go forward.

We have a lot of work to do on the talent side. But, I'd say here, now as we close we get the benefit of the Zebra team to who has a lot of experience in China and a proven track record to also help in driving that. So we are looking to leverage the Zebra leadership as we come together.

But, I do expect that it will take some time before China becomes a humming part of our portfolio. And maybe lastly as we come together as a single phase 2 to our customers in 2015, I do have increased confidence in the combined business..

Got it. And then just one follow-up, the $640 million to $650 million that you expect in Q4 from MSI enterprise, I think that's – my numbers are correct down maybe roughly 5% year-over-year. I'm just wondering if that's sort of the run rate trend you see in that business right now.

I mean the growth rates are kind of jumping around here in the last few quarters.

What's your sense on that?.

So I think for Q4 of last year was a particularly strong quarter for the Enterprise business, so if you are on a constant currency basis it will likely be down more like low to mid single digits.

And again, if you look at the regions you will see good performance in Europe, North America and Latin America and Asia Pac bringing performance down quite a bit for the entire group.

But I expect as we start getting into more improved execution we will be able to get more predictable results and as the integration comes together you find some more near term opportunities to help drive growth. And but, we still feel comfortable with our long-term guidance of having the business grow by 4% to 5% through cycle..

Thank you..

And our next question comes from Tim Mulrooney from William Blair. Please go ahead..

Good morning..

Good morning..

Good morning Tim..

You guys mentioned a surge in large deals during the quarter, can you just talk what was the source of those large deals, was it more brick and mortar stores or was it on the e-commerce side?.

Tim, this is Mike Terzich. I will take that. It was actually both. We had a strong quarter, the large deal pipeline was pretty robust as we typically see in the third quarter. We see some advanced placement of some technology solutions primarily to serve retail.

But, our retail business as expanded over the last couple of years both at the tier one level which everybody has heard from us often on as well as in tier two. And we have also over the course of the last five years built some pretty solid relationships with the e-tailer side of retailer business.

And we have seen material investments in all three of those areas, large deal, mid-market deal and the e-tail side of retail..

Okay. Thank you.

And then I know on your call some time you talk about customer concentration, you give the top three customers as a percentage of sales, I'm wondering could you talk about how customer concentration would change following the combination with MSI enterprise?.

I can talk about that. I think Mike Smiley is going to grab the concentration figures for you.

Essentially our go to market models are much – they are mere images of each other, so we don't think that large customer concentration will actually change in a material way we still deal with the same large set of distributors both businesses deal with the same set of distributors.

And while we have some meaningful and user relationships none will be of a level that's 10% customer..

Yes. And basically, we are not seeing as far as concentration it's very similar to a year ago. So it's really hasn't changed meaningful from prior year..

Okay. Thank you..

And our next question comes from Paul Coster from JPMorgan. Please go ahead..

Well, first, just a housekeeping question, you being kind of enough to provide us with some idea of what the revenue might look like on a pro-rata basis for the enterprise business in the fourth quarter. You have done so for the expenses, can you just explain why that is.

So we can sort of understand what the process is that you are going through?.

Good question. I think there is a couple of things that go on. First of all, there is purchase accounting that's going to have to flow into our P&L along with that we are still getting our hands around how we will migrate half of transition service agreements how that will result in actual expenses going forward.

So there is a lot of moving pieces coming together with fourth quarter type expense numbers. We will as we discussed our fourth quarter results, we will give a full view of what we see them to be in the first quarter..

Okay. And then just going back to this large deal, sort of narrative it seems to be so threading so not just now with Zebra but the traditional business but with the enterprise acquired business.

Does this yield more visibility or does it make your business ultimately a little bit more lumpy than it has been in the past?.

Yes. I think it probably makes it a little bit more lumpy, I think when you see – look at how – the range of forecast guidance that we give into future.

It might be a little of wider than what we would have had for the traditional Zebra business as the large deals they – if you do get them, you get the big bump, but if you don't get it also of course impacts the other side. So it will likely mean that we will be a bit more bumpy, lumpy..

Yes. Just as a sort of a follow-on point to that. I also think that the trend of revenue through the years will be different in the combined business than they have been for just the Zebra business.

As we talked about there is more retail in the Motorola – the enterprise business that sort of drives more of a third quarter sale than a fourth quarter sale. So again, the trend will be a little bit different on a combined business as we go forward..

All right. Thank you..

And our next question comes from Keith Housum from Northcoast Research. Please go ahead..

Good morning guys, congratulations on a great quarter again.

If I can just drill down more into the fourth guidance, so and it sounds like would be outside of FX and perhaps the Asia Pac decline in China, are you expecting relative flat to year-over-year sales for the enterprise group?.

First I will give you good guidance for both businesses here. So Zebra first we have a – in our outlook we see – still continue to see very favorable business conditions. We are poised to have a very strong finish to the year. Fourth quarter is going to be up approximately 7%....

Year-over-year..

Year-over-year and the 2014 is looking to be up about 14% year-over-year. So this is – we consider this to be very good results. We feel very good about this. 3Q was very, very strong quarter for us. All four regions had record revenues. We had record product revenues in our table top category mobile, card and our labels.

So it's where do we get that many records in one quarter. And we certainly feel that we expanded our leadership position in the industry in the quarter or through the year. And we feel quite confident in our outlook for the combined business here. On the enterprise business, I would say we expect continued momentum as we exit Q3 into Q4.

So the business will be down year-over-year some 6%, 7% in absolute terms but, probably about 3% to 5% in constant currency. We will be up or slightly up I would say year-over-year in all regions with exception of Asia. So it is – they should stable your experiencing or fairly well defined around Asia, China and Australia particularly.

And I would expect that we will start seeing improvements in the enterprise business from renewed focus on execution and being really – everybody living and breathing and owning one business.

And still think we are going to be very thoughtful and deliberate in how we go by integrating the business to make sure that we get the benefits, but we don't stub our toe on anything we can avoid..

Okay. I appreciate the color.

So inside Asia, you can just throw down more there, is it more than just beyond a change in management which was required there as part of the separation or is there a – is greater issues happening down in Asia?.

This is Mike Terzich. I will take that. The couple of things on that Keith particularly one is that Asia business was originally structured in a way that there wasn't a defined leader for the business remain with the government business in Motorola.

So we've had a combination of some leadership transition with the combination of some channel management dynamics that have went on in the business now. Our view on this has been to the degree that we provided some insight and some perspective.

We think we got our hands around what the issues are – we have put forth some retention on some of the key talent. We know the distribution and the reseller relationships that business primarily flows through channel in the geography. And so as we exit the year, we are pretty confident that we could leverage Zebra's leadership.

Our team, we got a lot of experience on the ground and the region and we think we can get that stabilized. But to Andres point, we are kind of sorting our way through a couple of quarters of some pain and it certainly does have some consequence to the fourth quarter outlook..

Okay.

So the channel dynamics, it's not market demand related issue or is it more – it's more executional related issue?.

Yes. It's more on the execution side from our perspective..

Okay.

And then if I can still ask one more question, can you break down the Motorola business that are more in terms of the scanners and computers and hardware local access network business and perhaps talk about the trends that you are seeing there and how you guys are performing?.

Yes. I think again if you were to look it through the lens of the geographic region also, I would say our data capture and mobile computing business and services have been doing well in the three main regions. Asia is obviously pulling everybody down there. The wireless LAN business tends to be a bit more choppy.

They can have a good quarter but in next quarter can be more weak. So I think we have more work to do to make sure that we position the wireless LAN business for more consistent performance and consistent growth..

In mobile computers, I'm sorry?.

Mobile computers and data capture have been performing well in the three main regions. There have been – so the performance have been pulled down say by Asia but if you exclude Asia all the product – of those product categories will be doing well..

Great. Thank you..

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

Hi. Good morning guys.

Can you talk a little bit about the integrated product roadmap with the Motorola enterprise price business, when we might be able to see some of the initial solutions or integrated solutions? And then lastly, where do you some of the key opportunities for revenue synergies as you combine the go to market organization?.

I will start it kind of at the high level here and then we get into a bit more detail for you. But, I would say first, as we start looking at the integration now, our priorities start with growth making sure we get the combined business back to growth particularly the enterprise business to consistent steady growth rates.

The second priority is around execution. We now according to large organizations together and as we do that we need to make sure we can really execute very, very crisply, very tightly.

So we are going to have a lot of attention on the integration activities and how we roll out new programs to make sure we can really demonstrate our excellence in execution. And the third priority will be around how we can create a common culture for the organization.

We are looking very much to make sure that's an externally oriented culture, so very customer centric where our customers provide the true Northstar for us to the direction. More specifically than to what the more shorter term opportunities are for the combined business I would say.

First, we expect to go deeper and wider within our enterprise account I think with the combination of our broader portfolio now we are going to have some accounts that are predominantly say a Zebra account and some are predominantly an enterprise account. Now, we get a chance to go and expand the total footprint with those.

We also believe that we have opportunities to take share in the channel where we have two good channel programs. And I think with tighter execution around the channel, we should be able to gain some ground there also.

We also believe that we have good opportunities to expand both vertically and geographically, but maybe particularly vertically in the short-term where the Zebra side we have very strong positions in healthcare and manufacturing stronger than the enterprise side.

But on the other hand, the Enterprise business has stronger positions in retail and transportation logistics than us that we think we can benefit from.

And lastly, we will put a lot of focus on services and services tax rate, annuity tax rate, the services and supplies to make sure that we provide a broader offering to our customers, which seems to resonate well in our work so far. I don't Mike, do you want to….

The one other point I think that you raised Michael which was on the roadmap side of the business and both organizations, this has been core to both companies innovations, we got very robust R&D deployments on both sides. We do have some longer term plans.

And I would say that I would characterize them as more in the mid-term right now those product roadmaps have been pretty much set for 2015, products are in development and on their way so to speak.

But, we will have an opportunity to integrate the portfolio in some meaningful areas particularly around mobility and where enterprise mobile computing, raggard mobile computing and mobile printing can come together we think that there is some really interesting ideas to enhance the performance proposition that those devices can have in the marketplace.

But, that's going to take a little longer to sort out..

If I could sneak one more question in, perhaps on a global basis, are you typically finding that the purchasing cycles are pretty aligned with the legacy Zebra business or they slightly offset, I guess, how should we think of – I guess upgrade patterns on an end customer base?.

I think it varies, I wouldn't say that they are particularly aligned. I think take retail as an example where we both have strong positions. The way retailers buy is often that they buy one device before the other. They may evaluate in kind of in parallel but often they do buy one and then go on to the other one.

So I wouldn't expect that we would have a perfect kind of synchronicity between the different product portfolios that we have in various industries. But, over a global basis I certainly would expect that there will be a – we will get the benefit of being very diversified across geographies products and verticals..

I guess maybe the takeaway would be that imply maybe a little less oscillation in the business on a longer term or through the cycle basis?.

Our aspiration clearly is that the – by combining the two businesses, we should have – we should get the benefit of the diversity we have – of the greater diversity we have..

Michael that point that Andres made earlier that selling deeper and wider into those enterprise accounts. This is a trend that we have certainly seen for the last several years we talked about it on previous calls, which has been IT led standardization across technology platforms, brands, architectures.

And we think we are going to be able to take advantage of that. And as more and more of the decision is made by IT organizations and they set standards for the technology they want to deploy, the Zebra and the enterprise branded products are kind of top in class and we think that we are going to have an advantage in the marketplace..

That's great. Thank you very much..

And our next question comes from Jason Rodgers from Great Lakes Review. Please go ahead..

Good morning all..

Hey, good morning..

Good morning..

Looking at the product side, just wondering if you have any plans to rationalize any of the products that the enterprise solutions business or the focus more on just growing those products?.

I think we will look at the overall portfolio and we certainly will look at and say skew rationalization. We have on the Zebra side we are working that for years so trying to make sure we rationalize and reduce the number of skews to make it easier for us as what to manufacture and keep inventory and serve our customers right.

I think we have a similar opportunity to do that also with the enterprise business to kind of simply the portfolio a bit. But obviously, we also want to make sure we do grow with that is the primary purpose of this whole thing..

And Jason, one other point on that and we talked about this in the past, the product lines today are complementary to each other. They are not competitive to each other, right? And we have leading positions with each of our product categories and so while there is rationalization, we could simplify some things for the channel community.

By and large those product lines don't compete with each other..

Okay.

And then looking at Europe definitely a strong quarter just wanted to get your thoughts on how sustainable that improvement is?.

Yes. Europe had very based strength. We were up in 10 out of 13 sub-regions particularly encouraged to get see strong growth from many of the southern European markets, we mentioned particularly along with U.K. and Germany. But there are also some choppy headwinds that we see from – I would say primarily today from FX.

So the Euro has declined against the dollar quite a bit, but also some of the political activities in the far eastern regions of Europe. But the overall, we see very solid growth for both Zebra and the enterprise business as we go forward. The pipeline looks good, the run rate continues to be good and have a good momentum..

Just as a – also for our forecast, the – our revenues negatively affected by about $2 million as a result of that facts. So some of that the forecast is muted because of that..

Then finally any guidance as far as with the tax rate might look like next year on a combined basis?.

I think what we have been talking about is that we will be sort of mid-double between 10% and 15% on a GAAP basis, but we will be closer to 30% to 35% on a cash basis next year. So I think that's sort of our view what will happen is the both of those rates will converge to about 20% at the end of five years.

So that's sort of our view obviously we are still pulling a lot of information together.

But, to get to where we want but I think the nice thing is that that at the end of five years and throughout the entire time, we will build the repatriate cash without negative tax consequences so that the cash would be available to repay debt which will increase bottom line earnings..

That's helpful. Thank you..

And our next question comes from Andrew Spinola from Wells Fargo. Please go ahead..

Thanks. I'm sorry, if I missed this.

But did you give any color or could you provide the EBITDA margin in the MSI business for Q3?.

No. We can't. That's something that – those are Motorola numbers and so I think keep in mind in those Motorola numbers are for discontinued operations. There is things like allocation and accounting for discontinued ops that makes those numbers difficult to – so to translate to sort of pro forma view. So the answer to that right now is no..

Fair enough.

But do you – how do you feel about the 18% to 20% EBITDA guidance next year, I know you have more time with the business or I'm sorry 18% to 20% long-term guidance?.

No. We are feeling good about that. I would say we are really confident in the model that we've given. So at this point we don't have anything to suggest they should be different than we have been talking about the last six months..

Got it. And maybe a question for Mike Terzich. This cycle has been a little unusual for at least for someone who hasn't followed this industry for a long time, but you had gone like 7 or 8 quarters of at best 2% growth and now you have done four quarters of kind of strong double-digit growth.

And I'm just kind of wondering how does the business usually react following periods like this.

And is this a normal cycle or what are we missing back in September of 2013 that has changed so much in the last four quarters in your legacy business?.

It's a good question. I wish I had all the insight to answer it. But, I would say that based on my long history, we have seen cycles like this before. I mean we are six quarters in and I think we had six consecutive quarters of sequential revenue growth on the Zebra side of the business. And that's not unusual for us.

I would say perhaps what's taken place of late is we have had a very robust business in North America. I think it's fair to say that back in 2008, 2009, we may have missed a refresh cycle in North America that resurfaced last year and into this year.

And then last, I do think that there is a changing business landscape where I think there is a greater appreciation quite frankly for the efficiency productivity technology solutions that we offer businesses.

And I think it's getting a bigger piece of the investment pie and we have had a lot of momentum and lots of people see the solution is delivering a hard ROI. And I think that's – there maybe a little bit of a landscape change here on a go forward basis..

Just to add one thing to that. I think I believe is more accentuated in this cycle than prior ones is that I believe we have been able to extend our leadership position in the industry in at a greater pace than we have historically. We have talked about bifurcation of the competitive landscape a bit.

And I think that's still the case that we have continued to grow faster than the market at the high end and some other people at the very low end are probably also growing a bit faster than the market. But, the people in the middle I think are feeling the pressure and probably not growing quite as fast..

The last thing I would say is, as we go forward, we haven't really included revenue synergies in our mode. But, we really see an increased attach rate of our printers to Motorola Solutions going forward. So again to Andres point I think we will continue to sort of take that trend of expanding our leadership as we move forward..

Thanks. Just one last one from me that the quarter for service and software was quite strong up $2.2 million sequentially and I'm just wondering, is there anything one-time in there or this is for a flat strength in motion works and can we see this continue going forward? Thanks..

Yes. Actually it's just fundamental run rate business that we did mention that Asia Pac has done well for us. And at this point there is no large one time things in those numbers at this point..

So just to clarify, what piece of the business in Asia is helping there, so it's not become motion works?.

Motion works is really in North America solution today with the NFL. In Asia, I think here we would see supplies that's the big piece and also some service maintenance activities as we go after repairs and other type of service offerings.

The one thing that we also have in there is retail solutions, so the Hart Systems acquisition which does also provide a benefit..

And then from a vertical standpoint healthcare obviously for a while has been very strong and supporting our supply sales..

Got it. Thank you..

Yes..

And our next question comes from Paul Coster from JPMorgan. Please go ahead..

Yes. Thanks for taking my follow-up. I just want to drill into the Motorola Enterprise business a little bit.

Can you give us some sort of sense to the breakdown between data capture and mobile computing and some proportion of revenues? And do you see the same growth rate for both moving forward?.

So I would say we don't break – that we don't break out the specific product lines helpful for traditional Zebra and I don't think we will start breaking out the individual product lines here also. I think we have seen both mobile computing and data capture grow at similar rates over the last several years.

There has not been a big diversion between them. So no big difference, maybe one thing, I will just go back and talk a little bit about say the Q4 outlook here that Q4 last year for the enterprise business was particularly strong.

There was – driven by number of things but I would say one specific thing that drove a very strong sales for Q4 of last year was that Motorola did a reorganization at the end of the quarter where all the – make all the sales people got new territories, which really put – really great incentive to make sure they didn't leave any leads behind.

So I think that pushed up revenue a bit and probably left the pipeline a little weaker for the beginning of the year..

But I think we would say the mobile computer for the quarter was a little bit stronger than we expected walking into the quarter..

Right. And that was because of the Android upgrade cycle. So there is – even these are matured businesses. But I mean, you see growth and in the case of mobile computing at the momentum Android was a catalyst near term and I'm sure there is others coming up.

What would be the types of catalysts we would expect from of the data capture side?.

So on the data capture side there is -- 2D barcoding is a big trend a lot of installations around the world are upgrading from 1D to 2D barcode readers. And they are also – the Enterprise business also released a new flatbed scanner, the bioptic scanner that has good traction here in early days.

So there is a few new products that are opening up new categories for the enterprise business also..

Okay. Thank you..

We have no further questions. I will now turn the call back over to Doug Fox for closing comments..

Thank you very much and thank you everybody for joining us today. Our next regularly scheduled conference call will be at our fourth quarter earnings call some time in February. Thank you very much and have a great day..

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