Motorola's cell phone handset division was expected to be first to face changes in Motorola's drive to revive slipping sales and revenue, but Motorola's Home & Networks Mobility unit will in fact be the first.
Motorola's Home & Networks Mobility unit, Motorola's second-largest division after the cell phone business, will be split into three units: television set-top boxes and modems; carrier-class wireless equipment; and next-generation wireless equipment, including WiMax and LTE.
The flagging cell phone handset division won't face a spinoff for another year, according to published reports.
The Wall Street Journal reported July 26 that John Burke, the current head of Motorola's cable business, will run the cable equipment division while Motorola Senior Vice President Fred Wright will lead the cellular wireless business. Dan Moloney, who currently runs the entire Home & Networks Mobility unit, will run the new next-generation division until a permanent head is announced.
The announcement comes just days before Motorola's second-quarter earnings report on July 31. Hamstrung by plummeting handset sales, Motorola officials predicted April 24 that second-quarter losses would be wider than originally projected.
In a conference call, Motorola CEO Greg Brown predicted that the company's expected spinoff of the handheld division is not likely to happen until 2009. Chief Financial Officer Paul Liska said Motorola will continue to cut costs this year, with expenses expected to fall by $540 million compared with 2007.
Brown first mentioned spinning off the handset unit shortly after taking over for former CEO Ed Zander in January. Billionaire investor Carl Icahn, who unsuccessfully tried to gain a seat on the Motorola board in 2007, has been pressuring the company to dump its handset division for more than a year.
In March, Brown said Motorola was launching a process to create two independent, publicly traded companies. To avoid a proxy fight with Icahn, Motorola's single largest shareholder, the company agreed to seat two Icahn associates on the board and to seek input from Icahn about the future of Motorola's mobile phone division. The agreement also dismisses all litigation between Icahn and Motorola.
After introducing the successful RAZR model in 2004, Motorola has struggled to launch another hit cell phone, driving it from the No. 2 spot among dominant handset makers. Nokia and Samsung are now the top two handset manufacturers.