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Motorola on Wednesday said it plans to split its Mobile Devices Business and Broadband & Mobility Solutions Business into two separate publicly-traded companies in the wake of shareholder outcry over the poor management of its mobile phone business.
In a conference call the Schaumburg, Ill.-based communications technology company said the decision to split follows an evaluation of structural and strategic realignment of its businesses and is a move to create success for both independent arms.
"Our decision to separate our Mobile Devices and Broadband & Mobility businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors," said Motorola president and CEO Greg Brown in a statement. "Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus -- as well as a more targeted investment opportunity for our shareholders."
Under the current plans, creating two stand-alone businesses is expected to take the form of a tax-free distribution to Motorola shareholders, subject to further financial, tax and legal analysis, resulting in shareholders holding shares of two independent, publicly-traded companies.
The Mobile Devices business will continue with multi-mode, multi-band communications products and technologies. The unit will continue to design, manufacture and sell mobile handsets and accessories globally with integrated software solutions.
The Broadband & Mobility Solutions business will include Motorola's Enterprise Mobility, Government and Public Safety, and Home and Networks businesses. These businesses make, design, integrate and service voice and data communications solutions and wireless broadband networks for enterprises and government and public safety organizations. They also offer end-to-end IP video solutions, cellular and high speed broadband networks, cable set-top receivers and other customer premise equipment for commercial and residential wireless networks.
According to Brown, dividing the two divisions does not change Motorola's priorities and Motorola will immediately begin searching for a CEO to head up the Mobile Devices business.
"We remain committed to improving the performance of our Mobile Devices business by delivering compelling products that meet the needs of customers and consumers around the world," he said. "As part of that effort, we have undertaken a global search for a new chief executive officer for the Mobile Devices business. We believe strongly in our brand, our people and our intellectual property, and expect that the Mobile Devices business will be well-positioned to regain market leadership as a focused, independent company."
During the conference call announcing the split, Brown said Motorola hopes to reinvigorate its Mobile Devices business, which has been struggling against the likes of Nokia, Samsung and BlackBerry for market share. In the final quarter of last year, Motorola told investors that net profit dropped 84 percent and sales of mobile phones fell 38 percent, while Motorola's chief rivals continued growth.
"We also expect this action to enhance the pace of recovery in Mobile Devices, to pave the way for its return as a leader in its industry, to accelerate our efforts to attract a new leader and to create shareholder value," Brown said.
The split came as no surprise to VARs, who said Motorola's struggling Mobile Devices unit was in need of a tune-up. Rumors had been circulating for more than a month that the mobile phone division would be spun off.