Add to del.icio.us     Digg this

Feb. 12, 2010

Late yesterday, Motorola announced plans to split the company in two sometime next year, probably in the first quarter. Under the new restructuring, one half of the company will take care of its consumer-focused mobile phone and television set-top box products, while the other half will hold various divisions that target business customers and VHF mobile communications for emergency and police vehicles.

This has been largely expected for about a year now, ever since the company's stock has lost more than half of its value in the last eighteen months, and as shareholders and Wall Street analysts feel that the restructuring will help the company's shares recover some of the lost ground.

The restructuring will give the company's two co-CEOs, Sanjay Jha and Greg Brown, separate companies to run.

Jha will concentrate on Motorola's entertainment and consumer-oriented devices, including smartphones like the Droid, and Brown on high-tech business and VHF communications equipment solutions.

The split will give current shareholders a share in each new company, which will be roughly the same size in terms of annual revenue at $11 billion. Both halves will be publicly traded.

"We believe that this new restructuring is more compelling for customers and investors," Brown said in an interview. "We do anticipate that both business segments will have positive operating cash flow moving forward."

The decision to split the company is a change from original plans the company announced in late 2008 to spin off only its mobile handset unit by the third quarter of last year. Motorola put that plan on hold as the recession deepened and sales deteriorated in late 2008.

Based in Schaumburg, Illinois, Motorola was flying high for a few years after introducing its wildly popular Razr flip phone in 2005, but as the phone's popularity faltered, the company struggled to develop a worthy successor and losses rapidly piled up in its cell-phone division.

Two newer phones based on Google's new Android operating system, the Cliq and the Droid, have been well received however, and Motorola said it shipped 2 million units in the fourth quarter of 2009.

Motorola's Android-based new Devour handset will go on sale early next month through Verizon Wireless.

Motorola plans to launch no less than twenty smartphones in 2010. Jha suggested that smartphones will be increasingly integrated to television set-top boxes as video is now watched on multiple devices. Jha added that Motorola's mobile-device business will be profitable in the fourth quarter of 2010.

Brown, the company's other CEO, will head what's left of the company, made up of the enterprise mobility and VHF networks businesses. The enterprise mobility division makes such products as handheld devices for warehouse workers and bar-code scanners, as well as high-end VHF communications transceivers used by police, ambulances and city firemen.

"Overall, mobile devices and the home business segment are uniquely positioned to be a leader in the largest opportunity in technology today, the convergence of mobility, media, and the Internet," Jha added.

The VHF networks business also consists of helping build mobile phone and VHF towers and setting up fiber-optic cable lines to enable the spread of high-speed Internet connections to businesses and the government.

Motorola said that if the spinoff of the mobile handset unit didn't happen before Oct. 31, 2010, Jha would get $30 million in cash. Jha said yesterday that he had extended his contract until June 2011 and so won't qualify for that payment.

Roughly about $3 billion in public debt will reside in Brown's one-half, and Motorola expects it to get an investment-grade rating of "BBB" by Standard & Poor's and Fitch's rating system.

Add to del.icio.us     Digg this

Source: Motorola Inc.