Motorola to split in two

Motorola has announced that it will split into two independent companies to try and revive its struggling handset business

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By  Mark Sutton Published  March 26, 2008

Motorola has announced that it will split its business into two, creating separate companies for its handset and networks divisions.

The split, which will take effect from next year, will result in two publicly listed companies, one handling Motorola's beleaguered mobile devices, the other the communications, networks, set-top box and enterprise mobility solutions.

The company's handset division has struggled in recent years, with its share of the worldwide handset market slipping from 21.1% in 2006 to 14.3% in 2007, making an operating loss of $1.2 billion.

The president of mobile devices, Stuart Reed, CMO Casey Keller and EMEA VP Mike Fenger all stepped down in March, and speculation had persisted for a long time that the handset business might be sold to an Asian company, with China's ZTE mentioned specifically.

Motorola's previous CEO, Ed Zander, stepped down at the start of the year.

The company has also been undergoing a proxy battle with investor Carl Icahn, who holds 6.3% of Motorola stock. On Monday, Icahn said that he was suing Motorola to gain access to documents relating to the mobile device business, and pushed again for Motorola to spin off the division.

In a statement from the company, Greg Brown, Motorola's president and CEO said: "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. 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."

"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. We believe strongly in our brand, our people and our intellectual property, and expect that the Mobile Devices business will be well-positioned to regain market leadership as a focused, independent company."

Motorola is hoping for a tax-free transaction to split the company, which would effectively give shareholders shares in both companies without any charges. The company has also begun a search for

Locally, the company was unable to comment on the implications for its business in the Middle East region at present.

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