Motorola stock rises after saying it may drop cell phones unit

Motorola Inc., which has lost mobile-phone market share to all of its major rivals, rose the most in almost four years in New York trading after saying it may bow to shareholder pressure and shed its money-losing handset unit.

Chief Executive Officer Greg Brown said Thursday the Schaumburg-based company is exploring its options, including a possible separation of its mobile-devices business.

The announcement pleased investors, including billionaire Carl Icahn, who have demanded that the company dispose of the unit. The business, which accounts for about half of Motorola's revenue, lost $388 million last quarter as customers defected to phones from Samsung Electronics Co. and Apple Inc.

"Enough people, from Carl Icahn to many others, have suggested that this is the best thing for Motorola to do," said Mark Mowrey, a Laguna Beach, California-based analyst at Al Frank Asset Management, which owns Motorola shares. "I hope it's not a reaction from the executive side to a lot of the near-term sentiment the company is hearing from investors."

Motorola shares today jumped $1.11, or 9.7 percent, to $12.61 at 3:31 p.m. in New York Stock Exchange composite trading, the most since April 2004, after rising 13 percent to $12.97 earlier. The stock had f allen 42 percent in the past year before today.

Citigroup Inc. upgraded the shares to "buy" from "hold" after the announcement.

Motorola's phone shipments plunged 38 percent last quarter after it lost customers to Apple's iPhone and camera phones from Samsung. That brought Motorola closer to losing its spot as the third -largest handset maker in the world.

Icahn, 71, had urged Motorola's executives to split the phone unit from the rest of the company. He boosted his stake to about 3.3 percent in September.

Today he nominated four candidates, Fran k Biondi Jr., William Hambrecht, Lionel Kimerling and Keith Meister, to Motorola's board, following through with a plan he said wasn't influenced by yesterday's announcement.

Motorola's other businesses include a unit that builds wireless networks for companies and a division that makes television set-top boxes and modems for home use. The networking division's sale s grew the fastest last quarter, rising 35 percent. That compared with an 11 percent increase for the set- top box unit.

As recently as last week, when Motorola's stock fell to $10.01, investors valued the handset operations at zero, Ehud Gelblum, a JPMorgan Chase & Co. analyst, wrote in a report today. Separated from the parent company, the business may be worth as much as 1.1 times sales, or $8.06 a share, according to Gelblum.

Under "aggressive, yet still reasonable" valuations, all of Motorola's businesses combined may fetch as much as $20.22 a share, he wrote.

Motorola has shed businesses in tough times before, including its Freescale Semiconductor division. In July 2004, the company sold shares in that unit, reducing the price of the offering by a t hird after computer stocks tumbled. Buyout firms led by Blackstone Group LP later bought the Austin, Texas-based business, taking it private.

Selling the phone unit now may be a mistake, said James Faucette, an analyst at Pacific Crest Securities in Portland, Oregon. He has a hold rating on the shares, which he doesn't own.

"There has been a lot of commentary from the investment community, including people like Carl Icahn, that some of the parts were worth more than the company was being valued at," he said. "I personally disagree. To get rid of it right now would get rid of it at a point where it is near the bottom of the value it could potentially be worth."

Standard & Poor's cut Motorola's credit rating last week by two levels, to BBB. It said there are "limited signs of recovery" because new phones such as the Razr 2 haven't met expectations.

Motorola shipped about 1.5 million Razr 2s in the fourth quarter, Brown said in an interview last month. Analyst Michael Walkley at Piper Jaffray & Co. in Minneapolis had projected about 2.5 mi llion.

Samsung overtook Motorola as the world's second-biggest handset maker last year, and Sony Ericsson Mobile Communications Ltd. is threatening Motorola's third-place spot.

Motorola's share of global mobile-phone sales fell to 13.1 percent in the third quarter, from 20.7 percent a year earlier, according to Stamford, Connecticut-based research firm Gartner Inc. Mo torola said last month that its fourth-quarter market share slid to 12.4 percent.

All three of its biggest rivals gained market share in the third quarter. Nokia increased to 38.1 percent, Samsung rose to 14.5 percent, and Sony Ericsson climbed to 8.8 percent.