Motorola has finally succumbed to investor demand and has announced it is prepared to "separate" its beleaguered mobile telephone division. That is code for "make us an offer" with analysts suggesting Motorola could get $20 billion for the handset business. There has been market speculation a Chinese buyer is interested in the business, which has a 12 percent market share of the hyper competitive handset sector.
In a statement released after market close yesterday, the company said it is: "exploring the structural and strategic realignment of its businesses to better equip its Mobile Devices business to recapture global market leadership and to enhance shareholder value. The company`s alternatives may include the separation of Mobile Devices from its other businesses in order to permit each business to grow and better serve its customers."
Motorola has been facing break-up calls from billionaire shareholder Carl Icahn, who owns 3.3 percent of the stock. Icahn lobbied for a boardroom seat last year and last night approved the separation: "For many months I have been publicly advocating the separation of mobile devices from Motorola`s other business and I am pleased to see that Motorola is finally exploring that proposal."
Motorola was an early leader in the mobile space and dominated the U.S. handset market for a number of years, but has seen its market share collapse in the face of innovative and cheaper products, led by European manufacturer Nokia. Last year Korean CE giant Samsung eclipsed Motorola for the number two position.
The possible sale comes as the traditionally tight relationship between U.S. carriers and manufacturers is being challenged by a new open handset alliance led by Google and with a heated auction battle for new 700 Mhz spectrum--with Google and Verizon speculated to be the two remaining bidders. In the face of Google`s alliance, Verizon late last year agreed to open its wireless platform to third party applications.
Motorola`s handset business represents about half of the company`s annual sales of $36 billion. A sale would leave Motorola with its home and networks division, plus its enterprise and government business. Once the mobile business is separated it is likely the remaining business will become attractive to a vendor looking to strengthen its position in the network and media sectors. Cisco?
