Sale of Motorola unit could have implications for handset division

Several new organizations, led by a report in the Wall Street Journal, have said that Motorola is considering selling its Home and Networks Mobility unit for about $4.5 billion. The sale of the unit could have implications for the company's handset division, which it hopes to turn around by aggressively releasing smartphones based on Google's Android platform.

According to the reports, J.P. Morgan Chase & Co., Goldman Sachs and Centerview Partners are advising Motorola. The idea of selling the Home and Networks Division came about after two private-equity funds, TPG and Silver Lake Partners, approached Motorola and said they might be interested in buying the unit. 

Motorola declined to comment on the sale of the unit, which makes set-top boxes and networking equipment, and accounted for about a third of the company's revenue in the third quarter. The company did say that it intends to continue with plans to spin off the handset division, which reported a 46 percent decline in year-over-year sales in the third quarter. 

The timing of the news has perplexed analysts, especially given the continued weakness of Motorola's handset unit. "The mobile devices business still needs the rest of the businesses to fund its operations," RBC analyst Mark Sue told Reuters. "It hasn't really recovered fully yet so it would be a little too early to cut off the lifeline."

Indeed, Motorola is just beginning to ramp up its Android phone production. It has two Android phones on the market--the Droid from Verizon Wireless and the Cliq from T-Mobile USA--but plans to release at least 20 smartphones next year, most running on Android.

"The timing is surprising," Tero Kuittinen, an analyst at MKM Partners LP, told Bloomberg. "Most people would have expected the Motorola handset division to stabilize before the company made any major moves."

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Bloomberg article
- see this NYT article

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