Motorola split a long time coming
It’s typical for big companies to move slowly. That’s especially true for a giant corporation like Motorola, which last week announced plans to split itself into two independent companies — a consumer-oriented business and an enterprise business — early next year.
Of course, the notion of splitting Motorola is nothing new. In fact, it’s been almost two years since Motorola’s board of directors approved a split and the subsequent hiring of Sanjay Jha to revitalize the company’s struggling handset unit and serve as the company’s co-CEO — a unusual title in today’s business environment — with Greg Brown, the leader of Motorola’s enterprise business, which includes its market-leading public-safety communications solutions.
What took so long — two years to create a plan to split the company that will take another year to occur? If industry reports can be believed, Motorola initially spent a lot of time trying to sell the commercial handset division but found no takers. The unit lost market share dramatically after failing to develop a successor to its popular RAZR phones. One industry analyst told me that the Motorola handset unit was so weak and losing so much cash in 2008 that it would not survives more than six months if a spinoff had been executed at the time.
Propping up Motorola’s handset unit during this period was the enterprise side of the company, which continued to post solid profits even as the global economy experienced a freefall. But even a record year for this side of the business received little notice, as investors and analysts focused their attention on the higher-profile commercial-devices unit’s struggles.
Today, the handset division has regained some market share, and a new line of smartphone products should see the unit become profitable by the end of the year, allowing the Motorola board to consider a split, according to Jha. In addition to the handset business, the company Jha will lead includes the cable-oriented consumer business, which provides some intriguing technology possibilities — for instance, allowing users to watch their DVR recordings on mobile devices — and, more important, a relatively solid cash business to offset the always-volatile handset market.
Meanwhile, the enterprise business will not be hamstrung by the handset unit, which Jha acknowledged has been a “drain” on company resources in recent years. Brown said he believes the split will unlock a “jewel” in Motorola’s enterprise-mobility business.
But the plans to split the company may seem odd to some. After all, the indications of commercial and private networking technologies converging have never been stronger. Given this, is this the best time to split Motorola, preventing such a convergence from occurring in-house?
The answer is an unequivocal “Yes,” according to Brown, who noted the divergent missions of the two businesses means there is not as much overlap as outsiders might think. For instance, Motorola’s consumer side has adopted Google’s Android as the software platform for its mobile devices, while the enterprise unit’s software leverages the Microsoft platform used by most business customers, he said.
“That’s part of the reason why I’ve wanted to separate as far back as four years ago. There really isn’t synergy [between the two groups],” Brown said. “The best thing that traverses both businesses is the brand, and … both companies will have full use of the Motorola brand, which is key.”
Indeed, Motorola has been the recognized market leader in public-safety communications for decades. Without having to worry about the roller-coaster fate of the consumer handset market, Brown is optimistic his post-split company will be able to maintain that status for many years to come.
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