Motorola announces plan to split company
Mobile wireless giant Motorola today announced plans to divide the company into two units, splitting the struggling handset division from the rest of the firm.
Under the plan approved by Motorola’s board of directors, the communications equipment company sometime in 2009 would become two publicly traded companies: one focused on mobile devices, and the other focused on broadband and mobility solutions.
The decision was reached after Motorola conducted a review of its operation announced on Jan. 31 amid controversy led by powerful shareholder Carl Icahn, who has advocated splitting the handset division, which has lost market share rapidly. Since November, Motorola’s stock price has declined more than 50%, from $19.68 per share to $9.76 per share as of yesterday’s close.
During a conference call today, Motorola CEO Greg Brown said the benefits of splitting the company include the ability for management to better focus on each of the two business sectors. In addition, Brown said the prospect of a separate mobile-device company would help his search for someone to head the unit.
“I think it enables the opportunity to attract a world-class CEO,” Brown said.
Although Motorola announced the plan to split the company today, Brown said there are “numerous details” that need to be determined. While the legal, tax and regulatory issues associated with the split will take “several months” to review, Motorola also must determine which of the new companies will get which intellectual property and the valued Motorola brand.
Mobile wireless consultant Andrew Seybold said he is not surprised that Motorola will wait until next year to split the company.
“First, it’s very complex,” Seybold said. “Second, now that they’ve announced it, I think they’re fishing for somebody to come buy the handset group. This gives them a little time to do that.”
As for branding, Seybold said he believes the Motorola name is less valuable to the handset division than to the rest of the company.
“To public safety and first responders, the Motorola name is everything,” he said. “In handsets, it’s going to be less and less important. If I were making the decision, I would keep it with the two-way radio folks.”
Regardless how the split is executed, Seybold said he believes it will even the playing field in the public safety communications sector, where Motorola has dominated market share for decades.
“If Motorola does this, it’s the best news their [public safety communications] competitors have ever had, because I don’t think they will be the same company they were,” Seybold said. “I think people will be leery of doing business with them. If you’ve cut off one hand, are you going to cut off the other? So I think this is an opportunity for everybody else.”
