Motorola’s Split Leaves Many Questions Unanswered

By Joseph Palenchar -- TWICE, 3/26/2008 9:00:00 AM

Schaumburg, Ill. — While the plan to divide Motorola into two entities is set, company executives must still clear up many details before the change occurs sometime next year.

Motorola’s plans to split itself into two publicly traded companies, one formed out of its ailing mobile-handset group, will increase management and employee focus within both companies, improve the companies’ agility, yield two companies with global scale and provide a “capital structure more tailored to the individual businesses,” Motorola president/CEO Greg Brown said this morning in a conference call.

The move will also make it easier to attract a new handset CEO by resolving uncertainty over that segment’s future, he contended.

The planned split is expected to take place sometime in 2009 and will “pave the way” for Motorola’s “return to leadership in the [handset] industry,” he said, but “much of the very detailed work remains to be done.”

Those details include whether the Motorola brand will continue to appear on handsets, how the two companies will split up intellectual property rights, how various corporate functions will be divided and other financial and legal implications. These issues “will be sorted out over the next several months,” Brown said.

Whether the brand name will continue on handsets, he conceded, “is to be determined,” but “we clearly recognize the importance of the Motorola brand.” A “coherent brand strategy will be undertaken thoughtfully,” he continued, because the Motorola brand “is strong, trusted, proven and valuable to mobile devices and other parts of the business.”

Motorola began evaluating its structural alternatives on Jan. 31 and “chose this strategy to maximize shareholder value,” he said. Other options could have included joint ventures and private equity investments, analysts said. Once the company splits, shareholders will own two separate publicly traded companies in a tax-free distribution, Brown said.

In recent discussions with Motorola customers, Brown said he found “the overwhelming majority” want Motorola to succeed. In handsets, that success will result from focus and “more consistent execution,” and the handset group has taken steps in that direction since he took day-to-day control of the business while searching for a new leader for the handset business, he said.

Brown said he has already “seen an increased level of communication and collaboration” in the mobile handset group and that he has taken “additional steps” to retail engineers, product-development employees and others.

The other company created after the split will be formed from Motorola’s broadband and mobility businesses, which consist of enterprise mobility, government and public safety, and home- and network-infrastructure products and services. These businesses manufacture, design and service voice- and data-communication solutions, including wireless broadband networks for enterprises and government and public safety customers worldwide, end-to-end digital and IP video solutions, cellular and high-speed broadband network infrastructure, cable set-top receivers, and customer premises equipment for residential and commercial wireless-network access.