Motorola
The split will give current shareholders a share in each new company, which will be roughly the same size in terms of annual revenue at $11 billion. Both halves will be publicly traded.
The move gives the companys two co-CEOs, Sanjay Jha and Greg Brown, separate companies to run. Jha will concentrate on Motorolas entertainment and consumer-oriented devices, including smart phones like the Droid, and Brown on high-tech business solutions.
“We believe this configuration is cleaner and more compelling for customers and investors,” Brown said in an interview. “We do anticipate that both business segments will have positive operating cash flow moving forward.”
The move is a change from plans the company announced in late 2008 to spin off only its handset unit by the third quarter of 2009. It put that plan on hold as the recession deepened and sales deteriorated.
The current separation is planned for the first quarter of 2011.
Motorola, based in Schaumburg, Ill., rode high for a few years after introducing the wildly popular Razr flip phone in 2005, but as the phones popularity faltered, the company struggled to develop a worthy successor and losses piled up in its cell-phone division.
Two newer phones based on Google Inc.s Android operating system, the Cliq and the Droid, have been well received, and Motorola said it shipped 2 million units in the fourth quarter. Motorolas Android-based Devour will go on sale in March through Verizon Wireless.
Motorola plans to launch 20 smart phones this year alone.
Jha suggested that smart phones will be increasingly wedded to television set-top boxes as video is watched on multiple devices. He added that Motorolas mobile-device business will be profitable in the fourth quarter of this year.
“Together, mobile devices and (the) home (business) is uniquely positioned to be a leader in the largest opportunity in technology today, the convergence of mobility, media, and the Internet,” Jha said.
Brown, the companys other co-CEO, will head whats left of the company, made up of the enterprise mobility and networks businesses. The enterprise mobility division makes such products as handheld devices for warehouse workers and bar-code scanners.
The networks business consists of helping build out cell phone towers and setting up fiber-optic cable lines to enable the spread of high-speed Internet connections.
About $3 billion in public debt will reside in Browns half, and Motorola expects it to get an investment-grade rating of “BBB” by Standard & Poors and Fitchs rating system.
The executives did not make clear how much debt will exist on Jhas side.
Analyst Douglas Christopher with Crowell, Weeden & Co. in Los Angeles said the split made sense.
“They both gain focus on their core businesses,” he said. “Ive always believed that every company should have one CEO.”
Both halves of the company will continue to use the Motorola brand, with the mobile device side owning it and licensing it royalty-free to the other.