Motorola urged to speed up handset unit spin-off

Research firm Ovum claims, if the spin-off of Motorola's handset unit is not completed within six months, the new entity may struggle to compete
Written by Sol E. Solomon, Contributor

Motorola's plans to split itself into two publicly traded companies will be a big relief for investors, according to research firm Ovum.

The split will spawn two separate entities: one company will handle handsets and accessories, while the other will take on wireless broadband networks and enterprise-level communications services. The move is expected to be completed in 2009.

Martin Garner, mobile director at Ovum, said in a statement: "It promises a new start for the very troubled handset division, but it does not solve its problems."

In January this year, Motorola said its handset division was underperforming and was expected to remain weak for the rest of 2008 while it waits for the development of new products.

Garner said the split should be completed within six months, if possible, because the longer the current situation goes on the harder it will be for Motorola's new handset business to compete when it is formed.

"If network operators give Motorola's current products the cold shoulder this year, the company may well end up having to cut significant numbers of staff during 2008 and scale back its new product development," Garner explained. "That would mean that the new Motorola would emerge onto the market in 2009 as a much smaller player."

The split has also heightened speculation that the new handset unit will be a target for acquisition or a joint venture, Garner said, but added that it is still too early to be sure.

Over the past few months, he noted, other major handset players have expressed no interest in a possible acquisition. "They'd probably prefer Motorola to go away as a competitor," said Garner, adding that private-equity companies might still be interested.

"We generally feel that companies would be far happier buying into the handset market if they could get a smaller company that is performing well and could be scaled up, rather than a much bigger company that has profound problems to sort out," Garner said.

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