Motorola will tip billions of dollars into its mobile phone unit once it is spun off into a public company, according to reports.
The company intends to buy back the majority of its $3.9 billion (€3.15 billion) in debt, and allocate its remaining cash of between $3-4 billion to the spun-off unit, sources told the Wall Street Journal.
A new firm named Motorola Mobility, comprised of the firm’s handset and set-top-box businesses, will be formed, with remaining assets bundled under the moniker Motorola Solutions.
That division will take on the firm’s remaining pension obligations and liabilities, however the WSJ sources claim it has enough cash to cope.
The goal is to leave two smaller companies with clear balance sheets, capable of making acquisitions or attracting acquisition attention of their own, the sources said.
Motorola has come under increasing pressure from shareholders to separate its ailing handset business from its other operations for the past two years, after activist investor Carl Icahn started calling for action.
The division has lost around $5 billion over the last three years, including $192 million in the last quarter alone, dragging down otherwise positive results from the firm’s other businesses, which generated a combined $11.1 billion in revenue last year.
Motorola acquiesced in February, but was forced to delay the spin-off this month, after downgrading its Q4 forecast by 2-4 cents per share.
Motorola had $8.48 billion in cash and investments as of April 3.