Motorola name still has market value
How the legendary and prestigious name of Motorola will live on after the company splits in two next year is anyone's guess, especially as company executives weren't forthcoming with many details Wednesday.
"Since Motorola didn't say what it intended to do with its brand name, no one knows," said Stephen Burnett, professor of strategic management at Northwestern University in Evanston.
"Typically when a company does this, you don't keep the same brand name. When you have a legendary name to deal with, you must decide on the brand and the right to use it and how it will be used."
The company that was created in 1928 has re-invented itself many times over the decades. But nothing else says "Motorola" more than its cell phone in a consumer's hand.
Motorola should continue using its brand name because it still has equity value, said Paul Wellen, marketing professor at Roosevelt University in Chicago.
"If people see an unfamiliar name, it just won't have the same cache, the same value in their minds," said Wellen. "Most consumers still see the Motorola name as a good thing."
Making such an announcement about the breakup and then not offering the new names or other details indicates Motorola quickly wanted to "dump and run," industry observers say.
"Normally, a company would give their plan and have everything else in place when they make this type of announcement," said Wellen. "So I believe (Carl) Icahn's pressure had a lot to do with this announcement. It's like they just wanted to get it done and wash their hands of it all. But I'm sure they must be close to making all of those other decisions."
Billionaire activist Carl Icahn has been pressuring Motorola since early last year. He's campaigned for the breakup of the company.
"They always had a vision before, but as two separate companies, they'll lose that vision," said Jane Zweig, chief executive of Columbia, Maryland-based The Shosteck Group, which analyzes the wireless industry.
Will splitting off the Mobile Devices business help Motorola return to its No. 2 market share leadership?
"I'd give it a 25 percent to 30 percent chance of returning to No. 2," said Zweig. "Samsung, Sony, Apple, and others have become stronger and Nokia isn't slowing down. Motorola should have done something about a year and a half ago."
This isn't the first time that Motorola spun off a business. The Schaumburg company did an initial public offering in 2004 of its chip business, calling it Freescale Semiconductor. It also immediately appointed a new CEO and kept it based in Austin, Texas. It then went private in 2006.
Spinning off public companies doesn't preclude any of them from being sold in the future, Burnett said.
Take for example BP, which had its petrochemical unit in Naperville. The business was renamed Innovene and scheduled for an initial public offering in 2005. But before the IPO and a month after Innovene moved some operations to Lisle, the petrochemical firm was sold to a British company for $9 billion, renamed again and turned private.
Many Wall Street analysts cheered the breakup Wednesday, saying it gives the handset business new life. They said employees will have new direction, which will lift morale. As the environment changes, so will its leadership and they will attract new talent.
"Today's call was like the starting gun shot in a race," said Jeff Kagan, an independent telecommunications analyst in Atlanta. "Now we watch and see what unfolds over the next year. Bang. They're off. These changes give Motorola a fighting chance again. Their ability to attract and retain good workers and executives has just increased."