It's Splitsville for Motorola

After struggling to regain its footing and pressure from high-powered investor Carl Icahn, the company is splitting into two businesses.

 

After months of turmoil that has included an exodus of top executives, declining sales, infighting with a top shareholder and a drop in its market position, troubled Motorola is now splitting into two companies.

Officials with the company announced March 26 that it will split into separate businesses, spinning off its handset division, which has been steadily losing money and market share for months. Motorola will keep its other division, which includes networking and enterprise equipment, as well as the government business that focuses on emergency services. The company will refocus on reviving the lesser-known part of the business.

The move comes after outspoken shareholder Carl Icahn and his allies on the Motorola board of directors began adding more pressure on the company to split into two. While Motorola ranks as the third largest cell phone maker in United States-down from No. 2-its handset sales have dropped since the introduction of the popular RAZR model in 2004. The company has not succeeded in producing a successor to the RAZRm, and Nokia and Samsung have dominated the market since then.

In a statement, Motorola CEO Greg Brown said the company already has begun looking for a CEO to lead the new handset company.

Read more here about the executive exodus at Motorola.
 

"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," Brown said in the statement.

Michael Sullivan-Trainor, an analyst with Technology Business Research, said the fight over the future of Motorola came down to the legacy of the RAZR and the company's inability to find a worthy successor.

"It's a story about the RAZR," Sullivan-Trainor said. "The RAZR was a product innovation that the company rode too long, and basically they didn't have a follow-on for it within the handset business. The company was relying on the handset business for all of its income, and so the handset business went south and they didn't have a follow-up business."

When Motorola reported its fourth-quarter returns in January, it announced that it shipped 40.9 million handset units, compared with 65.7 million units during the same time last year. Those returns seemed to have given Icahn and his allies the ammunition needed to force the change they wanted.