After months of flip-flopping, Motorola today announced that it is targeting the first quarter of 2011 for its planned separation. The company said it intends to separate into two independent, publicly traded companies. One will include the company’s Mobile Devices and Home businesses, and the other will include its Enterprise Mobility Solutions and Networks businesses.
The original plan was to spin-off just the handset business, but Motorola failed to get a bid it considered sufficient for business, leading it to revise the plan.
Motorola is undoubtedly hoping that bundling the units dedicated to mobile devices and customer premises equipment (CPE; set-tops, gateways and the like) will be more attractive for several reasons. First, the handset business is bouncing back a bit, and the Home unit remains well entrenched in its market, so the combination looks a bit more stable than the handset business alone.
Second, Motorola should be able to pitch the combination as a way to ride the convergence trend, in which the electronics industry aims to be able to deliver any content, anytime, to any device anywhere. In a scenario in which nearly any electronic device can connect to almost any other, it makes intuitive sense to have handsets and CPE that can connect seamlessly.
That, of course, would be the case if the two Motorola units can work closely together, which is more of an assumption about their joint future than a reflection of their relationship thus far.
Sanjay Jha, co-CEO of Motorola, will serve as CEO of Motorola’s Mobile Devices and Home businesses, effective immediately. The business will offer mobile converged devices, digital entertainment devices in the home, and end-to-end video, voice and data solutions.
Greg Brown, the co-CEO with Jha, will serve as CEO of Motorola’s Enterprise Mobility Solutions and Networks businesses, effective immediately. That side of the business will offer an end-to-end portfolio of products and solutions, including two-way radios, mobile computers, secure public safety systems, scanning, RFID and wireless network infrastructure.
It was reported earlier in the week that the company was in deliberations on the matter but with little consensus on the specifics. The company had long been talking about a spin-off of its mobile devices unit but postponed the plans as it struggled to return to profitability.
Motorola intends to do the separation through a tax-free stock dividend of shares in the new company to Motorola shareholders. According to a press release, both entities will use the Motorola brand. The Mobile Devices and Home business is expected to own the Motorola brand and license it royalty-free to the Enterprise Mobility Solutions and Networks business.
Motorola's mobile devices unit had struggled to find its place in the industry after its profits waned in the wake of the Razr’s success. However, the company's recent decision to bet on Google's Android smartphone platform appears to be working. The Motorola Droid, available from Verizon Wireless, has proved popular with consumers. Motorola says that it will release 20-25 Android devices this year, with Jha projecting a return to profitability by the fourth quarter of 2010.
– CED’s Brian Santo contributed to this report