Moto Hangs On to $400M iDEN Biz
Motorola will retain its "iDEN business, substantially all the patents related to its wireless network infrastructure business, and other selected assets," according to the press release announcing the acquisition.
Most notable in this list is iDEN, Moto's outdated but profitable push-to-talk business, used exclusively by Sprint Corp. (NYSE: S) and NII Holdings Inc. (Nasdaq: NIHD).
Moto invented P2T, but the walkie-talkie technology has lost its differentiation, as CDMA and UMTS networks now offer the service. Even so, iDEN remains among the company's most profitable businesses. It brings in approximately $400 million in revenue, according to co-CEO and head of Motorola Solutions Greg Brown.
P2T never took off in the consumer market on any network, but it remains a staple among construction workers and dispatchers. Brown said the deal will "enable our people to continue to focus on what we do best." Specifically, that means Moto will continue to focus on next-generation communications for its government, public safety, and enterprise customers.
"This purifies the portfolio," Brown said of the sale on a call with the media. "I think it will allow for unfettered positioning of Motorola Solutions as a pure play."
Brown will inherit Motorola Solutions, which will include Moto's mobility business and the network infrastructure remains, when the company splits in two early next year. (See Moto Shuffles Ahead of Split and Moto Wants to Do the Splits .)
Did NSN want iDEN?
NSN has never showed an interest in iDEN, which many believe to be a dead-end standard, from a technology point of view, but it might have benefited financially had iDEN been part of the package.
The iDEN business has the highest margins in Motorola's networks business, according to Matt Thornton, senior analyst at Avian Securities LLC . "But you're really only talking about two captive customers [Sprint Nextel and NII Holdings], and it's a negative growth business," he says. "NSN didn't need the customer footprint. Does it tweak the financials [of the deal]? Probably not."
It was more likely a case that Moto wanted to keep its high-margin iDEN business for itself, according to Akshay Sharma, research director at Gartner Inc. "Motorola probably wants to have it because it's used in public safety a lot," he says. "Emergency responders use it, and the Enterprise Mobility division focuses on public safety. There are future applications for push-to-talk."
Analysts were largely optimistic about the deal but noted that it may leave Motorola with a hefty amount of debt. The acquisition will be fully funded by NSN, but Moto didn't comment on whether Motorola Solutions would still take on full responsibility for Motorola's sizeable debt, which presumably now falls to a much smaller company.
Brown promised more information on Motorola's second-quarter earnings call next week and at the end of the year, when the deal is expected to close.
— Sarah Reedy, Senior Reporter, Light Reading Mobile