What will happen to Motorola's handset division?

 

What will happen to Motorola's handset division?  

Yesterday Motorola announced that it may separate its cell phone unit from the rest of its business and possibly even sell it (see related story below). Even though Motorola's recent struggles with its handset unit have been very public, yesterday's news was surprising to many in the industry. "I can't think of a good rationale for selling or spinning off what should be their flagship business," says Avi Greengart, research director of mobile devices at Current Analysis.

Motorola, of course, is an icon in the wireless handset world. Some of us remember a time in the mid-1990s when everyone carried a Motorola phone and the company's popular StarTac flip phone was a must-have for all business executives.

Admittedly it's been several years since I carried a Motorola phone. Like many consumers, I was lured away by sporty handsets from Korean manufacturers. "People are still buying Motorola handsets," says Iain Gillott, founder of IGR Research. "Just not enough of them are."

Nevertheless, Motorola's brand still carries a lot of traction in the market and that alone could be very valuable, particularly to a company that has little brand awareness in the market. "If you are a vendor and you want to get into the global handset market, this is a great opportunity," Gillott says. "A Chinese vendor such as HTC or Foxcom could buy Motorola's brand name, its distribution channels and its carrier relationships. I think that's what will happen."

Other possible buyers could be firms that currently don't make handsets but see this as a great growth opportunity. For example, Gillott says that some of the personal computing firms such as Dell or HP may view Motorola's weakness as their opportunity to get a leg up in the market. 

The potential sale of Motorola's handset division will have some huge ramifications for Motorola partners. Privately held semiconductor firm Freescale owes a huge portion of its business to Motorola. If Motorola sells its handset division to an existing manufacturer such as a Chinese vendor, they could potentially use local vendors for their semiconductors instead of using Freescale. "Freescale is a potential loser," Gillott says.

Perhaps the biggest loser is already embattled operator Sprint. The company earlier this week announced its commitment to iDEN [1] and now Motorola, the only maker of iDEN phones, could be getting rid of its handset division. Will a new owner support iDEN? That's a big uncertainty that Sprint doesn't need right now. -Sue [2]