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Summary:

Motorola has announced the spinout of its handset division, continuing a history of divesting itself from troubled business lines and isolating its potentially attractive networking and equipment business for a future buyer. Details about the spinout are few and far between, but Greg Brown, Motorola’s CEO, […]

Motorola has announced the spinout of its handset division, continuing a history of divesting itself from troubled business lines and isolating its potentially attractive networking and equipment business for a future buyer.

Details about the spinout are few and far between, but Greg Brown, Motorola’s CEO, plans to stay with the network and equipment division, which posted profits of $192 million in the set-top-box arena and profits of $451 million in the two-way radio and scanning divisions last quarter. A new CEO is being sought for the handset unit, which lost $388 million last quarter. The key question of who will get the Motorola brand is uncertain, but I think it should probably go to the handset business, if only because it’s the most consumer-facing one. (I will miss my Moto walkie-talkies, though.)


razr2.jpgBrown believes the spinout will create “two industry-leading companies,” while the rest of the world recognizes this as an attempt to put a dog of a business unit out, in order to keep shareholders happy. The split comes after activist investor Carl Icahn spent months pressuring the Motorola board to sell off the handset division, which never rebounded after RAZR phones stopped being the next new thing. Motorola rode that wave all the way to the shore and, after trying to sell the division for the last few months, is now spinning it off into a new public company. I’ll pass on those shares, thanks.

A similar fate befell Freescale Semiconductor, formerly Motorola’s semiconductor products sector, back in 2004. As a spinout, the chip company went public in a tax-friendly deal for Motorola. Freescale got certain intellectual property, a new name and Motorola as a customer. But it also had to deal with a bloated management structure and find the attitude needed to fight it out in the tough chip industry as an independent player. Frankly, it was a mediocre business and managed to get bought out by a private equity firm a little more than two years after its IPO. The handset business will face the same challenges.

The networking and equipment business, however, might soon find itself a target for another buyer. The RFID business, which Motorola expanded after a $3.9 billion acquisition of Symbol Technologies, is growing. Additionally, the set-top-box business has proven attractive to information technology companies eager to get into consumers’ living rooms.

There’s also continued M&A activity in the telecommunications gear business, which is still too big to support the smaller number of carriers in the world today. A deal with Nortel, Alcatel-Lucent, Tellabs or Ericsson might one day make sense. If WiMax takes off, the network division might find itself in a good position relative to other equipment vendors who have turned their back on the standard.

Given all this, I wonder who Brown will find to take on the handset business.

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  1. I’d love to email Greg Brown a couple candidates but the fact he runs a technology company and doesn’t seem to use email scares the sh!$# out of me.

    All this explains why Padmasree Warrior bolted for Cisco…they have their act together.

  2. DailyWireless » Blog Archive » Wednesday Links: WiFi Connectivity, Motorola Spin Off, RFID Wednesday, March 26, 2008

    [...] GigaOM shares some great perspective on the Moto spin off. The title kind of says it all: Moto’s Slow Death by RAZR Cuts. [...]

  3. Motorola is loosing their market share because of Nokia and other vendors.

  4. Did they ever screw themselves a few years ago with that aweful implementation of portable media player/phone ROKR with apple’s blessing. How can you screw that up. Well, they did somehow. They may not have the tech chops anymore to compete in the handset market. Now apple created a market for the iphone and ripped customers from sprint and verizon.

    RIP…

  5. CTIA: The Trailer – GigaOM Friday, March 28, 2008

    [...] that Om has dubbed the U.S. Rescue WiMax Act, and pondering both the valuation of and chances for Motorola’s handset business, but there will be a few trends to keep an eye out for as [...]

  6. Motorola Creates New Divisions in Advance of Split – GigaOM Monday, July 28, 2008

    [...] that Motorola has divided itself into three units, rather than two. In March Motorola said it would spin off its handset business in the wake of poor performance. Now, according to WSJ, it has further split its units into: a [...]

  7. Qualcomm Loses Jha to Motorola – GigaOM Monday, August 4, 2008

    [...] and the CEO of Motorola Mobile Devices, the new handset division. The handset division, which has struggled for the last few years, will formally spin out of Motorola in the third quarter of 2009. Props to Jha who is well respected [...]

  8. Could Android Save Motorola? Tuesday, May 12, 2009

    [...] the short-lived glory days brought on by its RAZR line of handsets. To that end, in 2008, it cut loose its handset unit altogether. Shifting to Android will be a tricky balancing act, or as Om put it, akin to [...]

  9. Verizon CEO Seidenberg’s Words of Entrepreneurial Wisdom Tuesday, June 23, 2009

    [...] how the telecommunications equipment company could have gone from making a hot phone like the Razr to its current state, Seidenberg said: “The failure to create new things quicker than the old things eat you [...]

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