Motorola to split company under pressure from investors

Motorola Inc. said today it is splitting into two companies -- one being its beleaguered Mobile Devices business.

The legendary phone business -- which helped make Motorola a household name worldwide for decades -- will have no immediate changes to its workforce or the location of its operations in the Chicago area, Chief Executive Officer Greg Brown said during an interview. Its headquarters will remain in Libertyville.

Indeed, Brown is aiming to re-direct the business back to its roots.

"We want to combine more enhanced and rich experiences with innovative hardware designs that Motorola has traditionally done and which Motorola was once known for," Brown said.

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Motorola says it will create two independent, publicly-traded companies, allowing the Mobile Devices and Broadband Mobility Solutions to operate separately.

Mobile Devices has struggled in recent years and never received any boost from several later variations on the same theme of its once-popular, ultra-thin Razr mobile phone. The business lost about 38 percent in revenues last year, lost global market share and continues to struggle.

The Razr's design started under then CEO Christopher Galvin, grandson of the company's co-founder, who was later forced out in favor of industry veteran Ed Zander. As the business initially received a boost from the newly launched Razr under Zander, it couldn't maintain its momentum and soon floundered. Zander resigned last year and was replaced by Brown.

"There's been no sale sign on Mobile Devices since we announced our new strategy on Jan. 31," Brown said.

That's when Motorola said it would consider "strategic options" to re-invigorate the floundering business, especially as billionaire activist Carl Icahn has been pressuring for the split. Icahn has increased his owner-ship in Motorola, has been campaigning to add four of his colleagues to the board, and filed suit this week seeking documents related to the Mobile De-vices unit.

Motorola did not have immediate responses to some questions like which company will carry the Motorola name, what the other company name will be, who will lead both companies and what will happen to the workforce.

The split is a good move, said Jeff Kagan, an independent telecommunications analyst in Atlanta, Ga.

"The company won't split up until next year in 2009," said Kagan. "Then it will be a while as the two companies gear up to compete. So it will be a while before we know if this will make a difference. The good news is this is a major move in the right direction."

The decision to spin off Mo-bile Devices will help the busi-ness in the long run, said Mark McKechnie, a telecom analyst with American Technology Re-search in San Francisco.

"This business will still have a tough 2008, but we see its turnaround in 2009 and 2010," said McKechnie. "It should take around six months to get a new CEO, a new plan and a new strategy on whether it will go after Nokia again or a more niche market, like RIM or Apple."

The other Motorola business will house Broadband Mobility Solutions, which includes Motorola's Enterprise Mobility, Government and Public Safety, and Home and Networks businesses. These businesses manufacture, design, integrate and service voice and data communication solutions and wireless broadband networks for enterprises and government and public safety customers world-wide.

Motorola Mobile

Devices Business

bull; Headquarters: Libertyville

bull; Operations: Plantation, Fla.; Singapore; Beijing, Hangzhou and Tianjin, China; Jaguariuna, Brazil; Basingstoke, England; and Chennai, India.

bull; Manufacturing: In 2007, handsets were primarily manufactured in Asia. Largest manufacturing facilities are in China, Singapore and Brazil. Each serves multiple countries and regions of the world.

bull; Business: Designs, manufactures, sells and services wireless handsets with integrated software and accessory products, and licenses intellectual property.

bull; Money: Sales in 2007 were $19 billion. Net sales represented 52 percent of the company's consolidated net sales.

Source: Motorola, SEC