=DJ Motorola's Highly Anticipated Spinoff Set To Take Place Tue
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By Steven Russolillo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Motorola Inc.'s (MOT) long-awaited split into two entities is set to take place formally Tuesday.
The two spinoffs will be Motorola Mobility Holdings Inc. (MMI), consisting of its consumer-focused smartphone and set-top box business, and Motorola Solutions Inc. (MSI), focusing on public safety radios and handheld scanners.
Both entities began trading on the New York Stock Exchange last month in the form of "when-issued" shares. "When-issued" trading helps investors determine the opening price for the new stocks before the official split. The market is used mainly by institutions and other sophisticated investors, and is generally less liquid than regular trading.
Motorola Mobility's "when-issued" shares dropped during their first few days of trading but have recovered of late and have soared more than 25% since they began trading on Dec. 17. Shares recently rose 4.3% at $30.34 on Monday. Meanwhile, Motorola Solutions has dropped 6.5% since mid-December and was off 0.5% Monday at $37.85.
The prices reflect the distribution of one Motorola Mobility share for every eight Motorola shares and a subsequent split of one Motorola Solutions share for every seven Motorola shares. The market capitalization for Motorola Mobility is about $9 billion, while the market capitalization for Motorola Solutions is about $12.8 billion at current market prices.
"There's no arbitrage here," said Jeffrey Fidacaro, an analyst at Susquehanna Bancshares Inc., as both are considered reverse stock splits. He also noted the "when-issued" market doesn't contain much of the speculation that surrounds initial public offerings of stock.
Motorola shares recently added 10 cents, or 1.1%, to $9.17. Motorola shares will stop trading under the "MOT" ticker symbol on Tuesday.
On Monday, Fidacaro initiated coverage of both spinoffs, giving Motorola Mobility a positive investment rating and $35 price target. He described the company as a "pure play" on Google Inc.'s (GOOG) Android operating system.
Motorola has bet heavily that its lineup of Android devices would rejuvenate its flagging mobile devices business--a move that is starting to pay off. In October, Motorola reported its third-quarter profit soared as it sped the release of new smartphones on Android's platform.
The expectation that Verizon Wireless will start selling Apple's (AAPL) iPhone in 2011 represents one of Motorola Mobility's biggest headwinds. But Fidacaro said Motorola will continue selling more smartphones through many carriers, helping to offset lost market share from Verizon Wireless, which has played a key role in the revival of Motorola's mobile devices business.
Verizon Wireless has used the Droid franchise as premier products to compete with AT&T Inc. (T) and the iPhone. But Motorola's momentum will be tested when the iPhone comes to Verizon.
"The main question is: Will the first quarter be the new floor for Mobility and can they grow from there?" Fidacaro asked.
Meanwhile, he offered a neutral rating on Motorola Solutions and a $39 price target. He said few revenue catalysts remained for the company in the short term, but positive cash flow combined with the potential to reinstate a dividend in 2012 represent longer-term catalysts.
-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com;
