Motorola Does the Splits
Motorola Inc. (NYSE: MOT) has started the process to split itself into two independent, publicly traded companies -- tentatively referred to as Mobile Devices and Broadband and Mobility Solutions -- in an effort to speed the recovery of its struggling mobile devices business. (See Moto Splits Off Device Biz.)
Amid pressure from activist investor Carl Icahn and M&A market speculation, Motorola has chosen to split itself in two to accelerate the turnaround in its device business. (See Icahn Chides Moto, Icahn Sues Moto, Nortel, Moto in JV Talks?, MOTO & NT: Again?, More on MOTO & NT, and Nortel: Don't Say M&A.)
The news follows Motorola's announcement at the end of January that the company was considering a range of strategic and structural alternatives. (See Moto Considers the Splits and Moto: Spin or Sale?)
The split will provide "improved management focus and a capital structure that is more tailored to the individual business needs," said Motorola CEO Greg Brown on a conference call today.
The Broadband and Mobility Solutions business will include Motorola's enterprise mobility, government and public safety, and home and networks businesses.
If the separation goes ahead, the transaction is not expected to be completed until some time in 2009. But Motorola believes that the structural change will help get the device business on the road to recovery.
"We are committed to improving our devices business," said Brown. "It will be a product-led recovery. We're taking steps now to ensure and solidify that recovery."
Motorola's fourth quarter device revenue last year was down 38 percent compared to the same quarter in 2006, and the company has been losing market share. (See Motorola Quiet on Device Turnaround , Devices Drag Down Moto, Moto Losing Ground, and Motorola Warns Again.)
"Customers want us to get the focus and execution back, which we have struggled with over the last few quarters," said Brown.
Brown says his top priority is to find a CEO to lead the handset business and the search is already underway. "[Today's decision] enables the opportunity to find a world-class CEO," said Brown. Marc Rothman, who was Motorola's financial controller will take on the CFO role in the device business. (See More Moto Exec Shakeouts, Handset Head's $2M Kiss-Off, and Motorola Loses Ex-Handset Head.)
Brown will remain CEO of of the Broadband and Mobility Solutions business and he is overseeing the day-to-day operations of the device business until a new CEO can be found.
But details about the two new companies are scarce at this point, and Motorola says it has not yet decided on major issues such as the branding strategy.
"We clearly recognize the importance of Motorola's brand," said Brown. "A coherent brand strategy will be undertaken thoughtfully and will play out in the next several months."
— Michelle Donegan, European Editor, Unstrung