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Motorola to split into two businesses

Garner said the decision to split off the handset division would likely "draw a line" under the current arrangement, which he described as "a bit of a poisoned chalice", noting the high departure rates of executives and staff. However, he warned that the decision "will not provide an instant fix for the underlying problem, which is that they don't have a broad enough portfolio of attractive handsets".

"[Motorola needs] a long hard slog of product development, which they are [engaged] in," said Garner. "Announcing this… will be a relief in terms of investor relations and hiring people. It will be a fresh start but it will not, of itself, fix the product range." He added that it has been "almost two years" since Motorola's flagship Razr handset "started to run out of steam".

Gartner research vice president Leif-Olof Wallin said Motorola's move showed that the company had not been successful in its search for prospective buyers for its handset business.

"The next step will be to look for buyers outside the handset business, including private equity, to spin out the [new company] or possibly IPO it," said Wallin in a Wednesday statement. "Over the past years, we've seen virtually all western device manufacturers, except Nokia, divest their handset business (Alcatel, Phillips, Siemens with [joint ventures or divestitures] and Ericsson with a joint venture with Sony)."

Wallin added that "it looks like none of the other handset vendors have showed sufficient interest in acquiring Motorola's handset business, which indicates that the divestiture might take some time."

"During this time, the handset unit will be under considerable stress with lots of inward-looking activities taking time and focus away from products, sales and marketing which might further fuel a negative spiral," Wallin said. "Competitors, most notably Samsung, Nokia and LG will probably gain the most during this period."

The New York Stock Exchange had not yet opened at the time of writing, but Motorola's shares on the Frankfurt Stock Exchange had risen by more than nine per cent since the start of Wednesday's trading.