Motorola will break in two in the first quarter of 2011

Motorola finally put the rumor mill to rest. The company announced it will break into two independent, publicly traded companies in the first quarter 2011. One company will include its Mobile Devices and Home Businesses and the other company will include Enterprise Mobility Solutions and Networks. Motorola intends to handle the separation through a tax-free stock dividend of shares in the new company provided to Motorola shareholders. The deal is subject to several conditions, including approval by Motorola's board of directors.

Sanjay Jha, co-CEO of Motorola, will serve as CEO of Motorola's Mobile Devices and Home businesses effective immediately. This division will handle smartphones, converged devices, digital entertainment devices in the home, and end-to-end video, voice and data solutions. In addition, this company will own the Motorola brand and license it royalty free to the Enterprise Mobility business.

Likewise, Greg Brown, currently co-CEO with Jha, will be CEO of Motorola's Enterprise Mobility Solutions and Networks, which will include the company's two-way radio business, mobile computers, public-safety systems, RFID and wireless network infrastructure.  The iDEN business will be split between the two companies--with iDEN handsets handled by Mobile Devices and iDEN network infrastructure handled by Enterprise Mobility.

During a conference call with investors, Jha said the combination of the Mobile Devices and Home businesses makes sense because it will position Motorola to be a leader in the convergence of mobility, media and Internet. He added that as wireless broadband becomes more widely available he believes there is a growing opportunity for devices and services that will allow consumers to share content and functionality across multiple devices. "We are working with our wireless and cable operator partners to have advanced services and expand the broadband availability inside and outside the home," Jha said. He added that he believes MotoBLUR--the company's user interface and services suite--could easily be integrated into a home viewing experience and run on set-top boxes. He also talked about cross-platform merchandising and the possibility of opening up more retail distribution channels for home networking products by leveraging the company's existing mobile retail channels.

Financial analysts on the call questioned Jha extensively on the financial viability of the Mobile Devices and Home business. Jha said the company has launched five smartphones in the first quarter of 2010, and is on track to launch 20 smartphones in 2010. He added that he is confident in the business' future.

After-hours investors remained relatively quiet; Motorola's shares were up just 2 percent on the news to around $6.82 per share.

Motorola's announcement essentially confirms a Wall Street Journal report posted a day ahead of the news.

Previously Motorola had said it would spin off its handset division when market conditions improve and the handset unit returned to profitability. During the company's fourth-quarter earnings conference call, Jha said the handset unit will be profitable by the fourth quarter of 2010. In the fourth quarter of 2009, Motorola's handset business suffered from a drop in sales, despite the introduction of new, high-end Android devices such as the Droid and Cliq during the period. Handset sales were $1.8 billion, down 22 percent from $2.35 billion in the fourth quarter of 2008.

In January, the WSJ reported that Motorola had put on hold its plans to sell its home and networks business, and was re-evaluating its plans.

For more:
- see this release

Related Articles:
Report: Motorola may spin off handsets with set-top box unit
Motorola's sluggish quarter dampens comeback hopes
Motorola presses pause on breakup plans
Analyst: Motorola could split four ways next year
Motorola remains firm on spinning off handset division

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