Motorola to split into two businesses

Motorola is to split into two companies, following months of speculation about the future of its handset division.

Subject to "further financial, tax and legal analysis", the American communications giant will next year spin off its mobile-devices business as an independent, publicly traded company, which will take with it a range of technology and intellectual property.

If the split goes through as planned, what will remain will be the "broadband and mobility solutions" business, which includes enterprise mobility, government and public safety, and Motorola's home and networks divisions.

Despite the fact that recent months have seen a flurry of speculation about Motorola's handset division, which many have seen as performing poorly, Wednesday's announcement caught the industry off guard. The views of activist investor Carl Icahn, who owns a five per cent stake in Motorola, are widely regarded as being a major factor in the decision to split the company. Icahn has been trying to get four directors onto Motorola's board and is suing the company in an attempt to acquire documents relating to its handset business.

According to Wednesday's statement, the split will take the form of a "tax-free distribution to Motorola's shareholders… resulting in shareholders holding shares of two independent and publicly-traded companies".

"Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and board of directors, together with independent advisers," said Motorola president and chief executive Greg Brown on Wednesday. "Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus, as well as more targeted investment opportunities for our shareholders."

Brown added that a search was now underway to find a chief executive for the new mobile-devices company. Motorola is currently in third place worldwide in the handset-manufacturing business, behind Nokia and Samsung.

The seasoned Motorola watcher and Ovum analyst Martin Garner said on Wednesday that splitting off its handset division was "the only option" left to Motorola.

"Certainly, for me, the thing that sealed it was in the fourth-quarter results where they said that not only is the handset division not improving at the moment but it would actually get worse before it got better," Garner told CNET.co.uk's sister site ZDNet.co.uk. "[Planned] new handset platforms still to feed through, and to have another whole year of performing as it had been doing was too much. There was no way you could say at that point that there were strong synergies with [Motorola's] other businesses."