Motorola to split
Motorola is hoping to save itself by splitting the business in two, a move that it hopes will bring it out of its crisis. The mobile phone manufacturer and telecommunications equipment vendor will divide into two separate companies, a handset company and corporate services concern. Motorola announced on Wednesday at its corporate headquarters in Schaumburg, Illinois that these independent corporations would be listed separately on the stock exchange.
The mobile phone business, which spiraled into crisis after a period of success, dragged Motorola into the red last year. Motorola has already been forced to concede its seemingly secure place as the world's second-largest mobile phone manufacturer after Nokia to Samsung; in the fourth quarter of 2007 its market share dropped 38 per cent over the previous year. Shareholders, among them notable investor Carl Icahn, have been demanding a corporate split for some time. He even brought a court action against Motorola recently to force them to release company documents, in order to support his criticism of the Motorola management and his demand to spin off the mobile phone business.
Apart from its mobile phone division, Motorola has a profitable business in television set-top boxes, as well as mobile communication networks and communications technology for corporations. Current Motorola shareholders will receive stock in both companies. The split is expected to take place in 2009. Corporate head Greg Brown, in office since the beginning of the year, announced his intention to reassess Motorola's strategy and to introduce radical cost-cutting measures, but he ruled out selling the mobile phone division. According to the Motorola boss, the decision to split the company will not result in a change of priorities. His intention was to continue to improve the situation of the mobile phone business with competitive products. He expected that the mobile phone division, as an independent company concentrated on its core business, could win back its place as a market leader.
Investors have apparently embraced the current plans: Shares in Motorola were up 6 per cent ahead of the New York Stock Exchange opening bell this morning. After closing at $9.76 on Tuesday, the share price had climbed to $10.33 by 8:00 a.m. New York time on Wednesday.