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Motorola To Split |
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Written by Adam Gosling
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Friday, 28 March 2008 |
Motorola
has bitten the bullet and declared it will separate its mobile devices
business from its broadband and solutions business following a
strategic review ignited by failing revenues and shareholder criticism
over the past year and a half.
The move
could lead to a sale of the struggling handset business or could be
simply designed to protect its more profitable broadband business in
the face of a potential slow down in handset sales this coming year.
Research
analysts are predicting that growth in the booming handset business
could be set to cool in 2008. Motorola has found it difficult to
produce a winning handset since the tear away success it achieved with
the first RAZR, although it achieved some level of success with the
BlackBerry competitor Q.
However, in August last year IDCs
Quarterly Mobile Tracker for Q2 07 revealed the company had given up
its second place behind Nokia as miniaturisation specialist Samsung
gained significant market share.
In those
results Motorola was the only vendor not to capitalise on outstanding
handset shipment growth across major markets. It was the first change
inmarketshare rankings in four years said IDC at the time.
The
struggling division came under attack and a bid for boardroom power by
activist
shareholder Carl Icahn threatened to unseat CEO Ed Zander in May 2007.
Zander was finally ousted in November last year after the loss to
Samsung amidst accusations the company had failed to innovate in the
handset business.
Despite
a focus on emerging markets with low-cost handsets, a raft of new
products and a new management team, all rolled out in the second half
of 2007, Motorola has failed to make significant inroads. At the end of
last year Motorola said its net profit had slumped 84 percent and sales
of its phones
also fell 38 percent despite strong growth at Nokia, Samsung and Sony
Ericsson.
In
January this year the new Motorola president
and CEO Greg Brown announced an evaluation of the structural and
strategic realignment of the businesses with the proposed split up of
the company the result. In making the announcement Brown said the hunt
was on for a new chief executive to run the mobile handset company and
that Motorola was committed to taking advantage of the brand and
existing Intellectual Property.
The split would result in two
independent, publicly-traded companies by distributing new shares to existing shareholders. The
Mobile Devices business will design,
manufacture and sell mobile handsets and accessories globally with
integrated software solutions, while the The Broadband
& Mobility Solutions business will include Motorola's Enterprise
Mobility, Government and Public Safety, and Home and Networks
businesses.
These businesses manufacture, design, integrate, and
service voice and data communication solutions and end-to-end digital and
Internet Protocol (IP) video solutions, cellular and high speed
broadband network infrastructure, cable set-top receivers and so on.
"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," said Brown.
Brown's
assertion that the company remains committed to improving the
performance of the Mobile Devices business
is unlikely to appease Carl Icahn who two days before the split was announced implemented proceedings to sue
Motorola in order to gain access to confidential information about the
handset divisions finances. Icahn is urging shareholders to vote for a
new board at the company's annual shareholder meeting due in early May.
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