Motorola details mobile division spin-off
Motorola will be spinning off its mobile division and splitting into two individual entities in January 2011, according to comments from the co-chief executive Greg Brown.
The company had previously announced that it would be splitting the businesses to create two independent entities in March 2008 and had confirmed that the division would take place in the first quarter of 2011.
Current co-chief executive Sanjay Jha will head the new Motorola Mobility division — responsible for the mobile phone and set-top box business — while Greg Brown will lead Motorola Solutions, primarily manufacturers of bar-code scanners, walkie-talkies and emergency communication equipment.
In the original announcement in 2008, Brown said that the split would provide more flexibility for the resulting companies, as well as "more targeted investment opportunities for our shareholders".
Speaking to Bloomberg Brown reiterated that once complete, the split could facilitate future acquisitions.
"Right now we're focused on launching, listing and growing organically. Then we'll see how things come at us in 2011. "
The report also suggests that the move will save $150m - $250m in operational costs, primarily from job cuts numbering in the hundreds, according to Brown.
In the company's third-quarter financial summary released 28 October, it showed that Motorola's mobile sales were up 20 percent — 3.8m devices — in comparison to the third-quarter of 2009, largely on the basis of successful handsets such as the Droid 2, Droid Pro and Droid X.
"We are highly optimistic about Motorola's rejuvenated smartphone business betting on the Android software. We believe the proposed split-off of the company will also help add more value to the mobile devices segment," wrote one analyst from financial investment research company Zacks.
"However, it remains to be seen how Motorola faces the challenge from Apple once Verizon Wireless, which significantly promoted the Droid portfolio of Motorola, starts selling the legendary iPhone 4," the report adds.
Zacks also noted that while Motorola is currently enjoying an upswing in its smartphone business that "in absolute terms the device shipment is far behind Apple's [iPhone shipment] and Research in Motion's BlackBerry devices shipment. We do not expect Motorola to reach anywhere near them in the immediate future".
In July 2010, Motorola sold its wireless networking division to Nokia for $1.2bn ahead of the split.