Motorola may spin off mobile-phone unit
Published: 01 Feb 2008 09:39 GMT
…3G network support and multimedia features. But most of the products were nothing more than souped-up versions of devices the company had already been selling.
The final straw seemed to come last week when the company reported an 84 percent decline in fourth-quarter profit, due mostly to sharp declines in its handset business.
The newly appointed Brown further spooked investors by saying during a conference call with analysts and investors that a turnaround of the handset division would "take longer than expected". Motorola had been counting on reviving its handset business in 2008, but Brown said that the division probably wouldn't regain its footing until sometime in 2009. The news sent the company's stock tumbling more than 20 percent.
Over the past year, Motorola's market share has steadily been slipping and, by the midlle of the year, it had dropped from the number-two mobile-phone company in the world to the number-three, ceding second place to Samsung.
Meanwhile Motorola's rival Nokia, which is number-one globally, grew its market share to 40 percent in the fourth quarter of 2007 by selling high-end handsets like the Nseries, as well as low-end handsets for the rapidly growing developing market. Not only has Nokia increased its market share, but the company has also boosted profits 44 percent to $2.68bn.
Faced with such bleak news, Motorola finally seems to be taking bold action to jump-start its turnaround. While more than 50 percent of Motorola's revenue comes from handsets, the company also makes TV set-top boxes and other telecommunications network equipment used in the home. It also makes public-safety radios and handheld devices designed for government and enterprise workers.
Icahn, who has long called for the company to be split apart, says Motorola's stock is undervalued. He believes that splitting the company into pieces would unlock nearly $20bn in shareholder value.
However, some industry analysts have cautioned that such a move could backfire, especially if Motorola sells its handset division without the Motorola brand name.
"The Motorola brand is most associated with the handset business," said Roger Entner, senior vice president of the communications sector at IAG Research. "Fundamentally it's a good business. Of course, management has made some poor choices and there's been poor execution. But without the name, it's not worth much."
As an example of how things can go horribly wrong, Entner points to Siemens' sale of its handset business to the Taiwanese company BenQ in 2005. A year later, BenQ Mobile, which had been set up to handle the brand business, went bankrupt and, with it, went the rest of Siemens handset division.
Entner believes a better strategy for Motorola would be to split into three separate companies, while keeping the Motorola brand associated with the handset business.
"Motorola is a consumer name," Entner said. "The handset division without the name is Siemens and BenQ all over again. And you saw what happened to them."
Credit: Motorola considers cell phone biz spinoff from CNET News.com
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