Motorola to split company in a year
Motorola yesterday announced plans to execute the much-anticipated separation of its company into two independent, publicly traded companies using the Motorola brand during the first quarter of 2011.
Under the arrangement, Motorola’s enterprise mobility solutions and networks business that includes mission-critical systems for public safety will be a single company led by co-CEO Greg Brown. Motorola’s mobile devices and home businesses — serving the consumer carrier and cable markets — will be combined to form a separate company headed by co-CEO Sanjay Jha.
“We believe that, as independent companies, each business will be best positioned to successfully pursue their respective strategies and opportunities for growth,” Brown said during the webcast conference call. “We also believe separation allows investors a more targeted investment opportunity and will increase long-term shareholder value.”
The notion of splitting the vendor giant has been discussed for some time, particularly as the mobile-device unit has struggled in recent years, depressing the company’s stock price despite the enterprise division’s consistent generation of healthy profits. While Motorola indicated it would split the company last year, many industry analysts predicted a spinoff of the mobile-devices unit would fail, because that business was so weak at the time.
However, Jha reiterated his expectation that the mobile-devices unit will be profitable by the fourth quarter of this year.
“I believe we have made a very good start in transforming the mobile-devices business to being smart-phone focused and long-term profitable,” Jha said during the conference call. “That really is the core of why we think we can announce this separation.”
Jha also expressed optimism that having Motorola’s home business as part of the new company would help in product development for consumers that want to be able to access from their home — such as recorded video from a cable box—with them on mobile devices.
Because of the media and investment focus on the consumer side of Motorola, the enterprise unit’s success in recent years has been overshadowed. That will not be the case after the split, Brown said.
“Everybody typically looks at that [mobile-devices] division and those assets. I think the real story is unlocking the value of the jewel of Motorola called enterprise mobility,” Brown said today during an interview with Urgent Communications. “By us moving toward this step of separating the company is a step closer to having enterprise mobility as a pure-play, interoperable security company, along with enterprise mobile computing.”
Under the planned arrangement, Brown’s enterprise-focused company will assume all Motorola debt. Intellectual property will be divided between the companies to ensure that both entities have the “assets we need to succeed,” Brown said during the conference call.
After receiving assurances that the transaction can be executed tax free, the Motorola board of directors is expected to approve the split later this year. The action does not require approval from Motorola shareholders.