Motorola Solutions, Inc. (NYSE: MSI) shares fell as much as 5 percent after short-seller Citron Research said the company is vulnerable on overpriced government contracts. Motorola shares fell as much as 5.37 percent to $77.34, the biggest one-day decline since May 2016. The stock had rose 30 percent over the past year.
Andrew Left, author and editor of the online investment newsletter Citron Research, said in a report posted online Tuesday that Motorola depends too much on selling overpriced handset into single-sourced government contracts.
Left cited that Motorola has an 83.6 percent gross margin in the U.S. by selling handsets, while it only has a 9 percent in Europe. President Donald Trump had emphasized the importance of competition for government contracts.
"Motorola Solutions has been coasting on a simple formula: Dote on police, fire and sheriff's departments, woo contracting officials, pursue every angle to gain a sole-source deal or an inside track, and where possible, embed equipment with proprietary features so it can't interact with competitors' products," he said.
Motorola disagreed with Citron, saying that the short seller’s report is misleading.
“Citron has made numerous false and misleading statements,” Motorola said in its statement. “Of note, Citron’s comparisons to products and price points in Europe and other locations are baseless, as different countries have different standards and require different technologies.”