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Motorola Sets Split For Early Next Year
Motorola Inc. said it would split into two publicly traded companies by the first quarter of next year, the company's latest attempt to reinvigorate its disparate businesses.
[MOTOROLA2B] Bloomberg News

Greg Brown (above) and Sanjay Jha will each run one of the companies.

The Schaumburg, Ill., company has long sought a break-up but recently shifted its strategic plans. The change was reported by The Wall Street Journal on Wednesday.

Motorola Thursday said it will group together its core handset unit with the unit that makes television set-top boxes, placing them under co-Chief Executive Sanjay Jha.

Fellow co-CEO Greg Brown would oversee a separate company selling two-way radios, bar code scanners and gear for telecommunications carriers.

"We have been at times a drain on resources on other businesses, and we've reduced shareholder value," Mr. Jha said on a conference call, adding the split would add value to both companies.

Under the plan, the two companies would each account for roughly half of Motorola's current sales, which were $22 billion last year.

They will share the Motorola brand. Mr. Jha's company will own the brand, and license it out for use to Mr. Brown's business.

The break-up will occur as a tax-free dividend of shares in a new company to existing Motorola shareholders.

Two years ago, the company said it intended to spin out its handset unit by the third quarter of 2009 and hired Mr. Jha to run it. But the unit's slumping sales and deep losses forced the company to put that plan on hold.

More recently Motorola's board and its bankers explored a sale of the set-top box business, but failed to get offers that they felt were attractive enough.

Investors, including billionaire activist shareholder Carl Icahn, have long pushed for a break-up of Motorola, because there are few natural connections between the various divisions.

"What they do in the next six months would either validate these plans or cause a train wreck," said Ken Dulaney, an analyst at Gartner.

The separation comes as the company looks to turn around its various flagging units. The higher profile handset unit has shown some signs of life with the success of its Droid smart phone, which benefited from a heavy push by Verizon Wireless.
[MOTOROLA2] David Paul Morris/Bloomberg

Sanjay Jha.

The unit, though, remains under pressure as it changes its focus to a more profitable segment of the cellphone market, but still faces competitive pressure from the likes of Apple Inc.'s iPhone. Mr. Jha said last month he expects the unit to return to profitability by the fourth quarter, putting it on a sounder footing for the spinoff.

"They're doing well on their smart-phone strategy, and there remains a lot of opportunity there," said Matthew Thornton, an analyst at Avian Securities LLC.

The various other businesses continue to see declines as a result of weakened consumer and government spending. Customers have held back spending on entertainment, keeping sales of new set-top boxes in check. Local governments, many of which are facing budget deficits, are less inclined to invest in new public-radio systems.

Mr. Brown's company will assume Motorola's outstanding debt, which is expected to be about $3.3 billion at the time of the split.
http://online.wsj.com/article/SB10001424052748703382904575059722397946464.html?mod=WSJ_hpp_LEFTWhatsNewsCollection