Motorola
Co-Chief Executive Officer Sanjay Jha said last month that Motorola, the biggest U.S. mobile-phone maker, is progressing with plans to spin off the handset unit. Now the company is exploring a sale of its home-entertainment division, which makes cable television set-top boxes, according to three people with knowledge of the plans.
Motorola lost more than $4 billion last year after the companys phones failed to compete with Apple Inc.s iPhone and Research In Motion Ltd.s BlackBerry. Getting rid of phones and set-top boxes would leave Motorola as a maker of two-way radios and bar-code scanners, a business that proved more profitable over the past five years than the home-entertainment unit.
“The new Motorola in the long term will be grounded on its enterprise business,” said Ken Dulaney, an analyst at Gartner Inc. in San Jose, California. “The good thing is they have a degree of expertise in their enterprise business thats not easy to replicate.”
A possible sale of the set-top box unit isnt imminent, said two of the people, who declined to be identified because the discussions are confidential.
Surprising Timing
“The timing is surprising,” said Tero Kuittinen, an analyst at MKM Partners LP in Greenwich, Connecticut, who recommends selling the stock. “Most people would have expected the Motorola handset division to stabilize before the company made any major moves.”
Jennifer Erickson, a spokeswoman for Schaumburg, Illinois- based Motorola, declined to comment.
Motorola fell 8 cents to $8.77 yesterday in New York Stock Exchange composite trading. The shares have almost doubled this year.
Profit at the home-entertainment division fell 24 percent to $199 million in the third quarter, while sales dropped 15 percent to $2.01 billion. The unit accounted for about a third of revenue.
Motorola first announced plans in March 2008 to split in two. The company delayed the plans seven months later, citing the global financial crisis and slowing U.S. economy. In the mobile-phone market, Jha is counting on handsets based on Google Inc.s Android operating system. Two phones, the Droid and the Cliq, went on sale this month.
Cash-Flow Generator
“The home networks business isnt a growth business,” Thornton said. “What it can be is a cash-flow generator. It doesnt require investments.”
Private-equity firms including TPG and Silver Lake may be interested in the business, the Journal reported, citing people familiar with the discussions. Owen Blicksilver, a TPG spokesman in Fort Worth, Texas, declined to comment. Calls to Menlo Park, California-based Silver Lake werent returned.
The company retained JPMorgan Chase & Co. and Goldman Sachs Group Inc. as advisers on a possible sale, the Journal said, citing people familiar with the matter. Andrea Rachman, a spokeswoman for Goldman Sachs, declined to comment, as did Tasha Pelio, a spokeswoman at JPMorgan.