Motorola to Split Enterprise, Consumer Businesses Q1 2011

Motorola plans to separate into two independent and publicly traded companies during the first quarter of 2011, executives announced Feb. 11.
One business will comprise Motorola’s Mobile Devices and Home business. With current co-CEO Sanjay Jha as CEO, it will offer a portfolio of mobile converged devices and digital entertainment devices, end-to-end video and voice and data solution.
The second company, consisting of Motorola’s Enterprise Mobility Solutions and Networks businesses, will have current co-CEO Greg Brown as its top executive and focus on enterprise products and solutions, including rugged two-way radios, mobile computers, public safety systems, scanning, RFID and wireless network infrastructure.
“The board of directors supports the planned separation of Motorola into two industry-leading public companies,” David Dorman, chairman of Motorola’s board of directors, said in a statement. “We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success and enhances long-term shareholder value.”
Dividing a company into better-defined entities is a conventional business strategy, Charles King, an analyst with Pund-IT Research, told eWEEK.
“In the case of Motorola, placing the wireless handset and set-top box groups in their own organization could help them move more quickly, both in creating new products and pursuing opportunities in rapidly changing markets,” King said. “Since the wireless networking business and enterprise radio systems operations form the core of Motorola’s traditional business, which requires a significantly different business approach and strategy, it also makes sense for them to inhabit their own separate entity.”
King added that Motorola surely also hopes the split with help it to be more competitive in the mobile handset market, which is becoming dominated by RIM (Research In Motion) and Apple.
Broadpoint AmTech analyst Mark McKechnie is glad to see Motorola reach this decision.
“We view [Motorola’s] announcement as a clear positive in that it 1) removes uncertainty, 2) offers operational focus, and 3) provides a near-term path to unlock “sum-of-parts” valuation,” McKechnie wrote in a Feb. 12 research note. “We look for more detail at [Mobile World Congress] next week in Barcelona.”
Motorola plans to separate the companies through tax-free stock dividend of shares in the new company to Motorola stockholders. Further, the Mobile Devices and Home business will own the Motorola brand but license it royalty-free to the Enterprise mobility Solutions and Networks business.
Pund-IT’s King adds another potential benefit. “In addition,” he said, “the reorganization would probably make it easier to sell assets from Motorola’s traditional business lines, if appropriate buyers were found.”