Motorola to split into two independent businesses

26 Mar 2008

Following a major restructuring programme revealed in February, US communications giant Motorola is to split itself in two, an independent mobile company and an independent broadband company, it emerged this afternoon.

“Our decision to separate our mobile devices and broadband & mobility solutions businesses follows a review process undertaken by our management team and board of directors, together with independent advisors,” said Greg Brown, Motorola’s president and chief executive officer.

“Creating two industry-leading companies will provide improved flexibility, more tailored capital structures and increased management focus, as well as more targeted investment opportunities for our shareholders.”

The move comes after Motorola reported a disappointing year in 2007, posting full-year revenues of US$36.6bn, down from US$42.8bn in 2006. The fourth quarter of 2007 saw a 84pc drop in net profits.

Sales in the mobile devices division were down 38pc on the previous year at US$4.8bn, despite the introduction of nine new phones during the last quarter of 2007.

The company also struggled for relevance in an ever-shifting market. Despite taking the design lead for a while with its innovative Razr range, new devices such as the Nokia N95 and Apple iPhone began to sweep into the marketplace, while new competitors with a range of new handsets also began to bite into Motorola’s previously unassailable position.

Samsung overtook Motorola during the fourth quarter of last year in handset shipments, taking the No 2 vendor slot for shipments worldwide.

Motorola’s other divisions performed solidly with the home and networks mobility division reporting an 11pc increase in sales to US$2.7bn and the enterprise mobility group reporting a 35pc increase in sales to US$2.1bn.

Motorola said today that the creation of the two stand-alone businesses is expected to take the form of a tax-free distribution to its shareholders.

The new mobile devices business will design, manufacture and sell mobile handsets and accessories worldwide and will continue to develop software and IP.

The separate broadband & mobility solutions division will include Motorola’s enterprise mobility, government and public safety and home networks businesses and will focus on internet protocol (IP) communications.

“Our priorities have not changed with today’s announcement,” added Brown. “We remain committed to improving the performance of our mobile devices business by delivering compelling products that meet the needs of customers and consumers around the world.

“As part of that effort, we have undertaken a global search for a new chief executive officer for the mobile devices business. We believe strongly in our brand, our people and our IP, and expect that the mobile devices business will be well-positioned to regain market leadership as a focused, independent company.”

The completion of the split will be subject to certain conditions, including inter-company agreements, filing of documents with the Securities and Exchange Commission and a ruling from the Internal Revenue Service in the US as to the tax-free nature of any transaction.

The company said the separation of Motorola will be completed in 2009.

By John Kennedy