Motorola's Brown sees 'golden opportunity' to expand

Motorola Inc. sees a "golden opportunity" to expand its government and corporate business once the mobile-phone unit spinoff takes place, Co-Chief Executive Officer Greg Brown said.

Brown oversees that group and the home-entertainment and networks unit, which together account for about two-thirds of revenue. Co-CEO Sanjay Jha leads the handset division, whose split from the rest of the company was announced last year. Once that's done and the economy rebounds, Motorola may seek acquisitions, Brown said.

"Fast forward the tape 12 to 24 months, I think it's fair to say we would evaluate opportunities that we thought were pretty compelling," he said in an interview last week at Motorola's headquarters in Schaumburg.

Motorola's business probably will begin recovering through the second half, said Brown, 48. Sales in the government and corporate business dropped 15 percent in the first as companies froze spending in the worst recession in 50 years. Handset sales fell at three times that rate, hurt by competition from rivals like Apple Inc., which introduced a new iPhone last month.

"Most people that have invested in Motorola over the years have been paying attention to the handsets," said Matt Thornton, an analyst at Avian Securities LLC in Boston. While the government and corporate business doesn't draw as much scrutiny because it doesn't sell to consumers, it's "the most valuable asset in the portfolio," he said.

Share Performance

Investors have snapped up Motorola shares this year, betting on the company's plans to improve its mobile-phone unit, Thornton said. When the company is split, the corporate and government segment will get more attention, he said.

Motorola dropped 1 cent to $7.24 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 63 percent this year, compared with 11 percent for the Standard & Poor's 500 Index.

Second-quarter mobile-phone sales declined to $1.83 billion, Motorola said last week. Revenue at the home and network unit, which includes TV set-top boxes, fell 27 percent to $2 billion.

Sales at the enterprise mobility unit, which sells bar-code scanners to retailers and supplies emergency and police departments with walkie-talkies, declined 17 percent to $1.69 billion. Motorola controls about 70 percent of the global market for government wireless networks, Avian's Thornton said.

Acquisitions may help Motorola offer a wider range of services to clients or expand international sales, he said. North America represented 57 percent of the unit's sales last year, with the U.S. government making up 8 percent.

Broader Reach

"If I think of Microsoft, I think of enterprise desktop computing; if I think of Cisco, I think of enterprise infrastructure," said Brown, who joined Motorola in 2003. "If I talk about enterprise mobility, I think that territory has yet to be staked out, it's a golden opportunity for Motorola."

Any purchases would occur after the split is completed, he said. Motorola postponed the separation almost a year ago as the economic slump worsened. The timing of the breakup will hinge on the economic recovery and how the handset division's new products perform, Brown said.

Motorola, which hasn't released a bestseller since its Razr device in 2004, plans to debut phones for the holiday season based on Google Inc.'s Android software. The company has narrowed its range of phones, allowing the division to pare payrolls. Motorola has cut 8,000 jobs, with about three-quarters of those at the handset business.

Global Phone

The worldwide mobile-phone market will shrink 13 percent this year as the global economic crisis damps demand for new handsets, according to IDC of Framingham, Massachusetts.

While the mobile-devices unit has typically overshadowed Motorola's other businesses, the split may help the home, corporate and government units attract new investors, Brown said.

"Even though my organization is two-thirds of Motorola and 100 percent of the profit -- obviously, we're 100 and X percent -- we don't get talked about," he said. "I've always believed the nucleus and strength of Motorola was in the systems business."