Motorola (NYSE:MOT) plans on diverting a large portion of its cash to its handset division once it spins the division off from the rest of the firm early next year, according to a report in the Wall Street Journal.
The report, citing unnamed sources familiar with the matter, said that Motorola will buy back most of its debt and divert a substantial part of its remaining cash--around $3 billion to $4 billion--to allow the loss-making handset business--which is spinning off along with the company's set-top box unit--to emerge stronger financially.
Representatives from Motorola did not immediately respond to a request for comment. However, a Motorola spokeswoman told the Journal that the company's co-CEOs "have a common vision and continue to work together and with respective teams to position each business to stand alone and succeed."
According to the report, Motorola will also be freeing the new company from pension liabilities and other financial obligations. Motorola co-CEO Sanjay Jha will lead the new company, which will be called Motorola Mobility, and the the company's board wants the new business to be strong enough to invest in new smartphones and potentially make acquisitions, the report said. Greg Brown, Motorola's other co-CEO, will lead the firm's enterprise mobility and networks units called Motorola Solutions.
Motorola announced in February that it would separate in the first quarter of 2011. The company has been churning out smartphones based on Google's Android platform, and has received strong carrier support, especially from Verizon Wireless (NYSE:VZ), which is set to unveil its latest Motorola Android phone, the Droid X, next week.
Still, despite a rise in smartphone shipments in the first quarter, the handset unit remains weak financially. The division posted sales of $1.6 billion in the first quarter, down 9 percent from $1.8 billion in the year-ago period. However, its operating loss narrowed to $192 million, better than the $545 million operating loss in the first quarter of 2009.
- see this WSJ article (sub. req.)
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