Motorola (NYSE: MOT) says it has commenced a plan to split into two companies, two days after activist investor Carl Icahn chided the company for not updating shareholders on strategic efforts. The business will be separated into two publicly traded entities: Mobile Devices and Broadband & Mobility Solutions. CEO Greg Brown will helm the Broadband & Mobility Solutions business, and the company says it’s begun a search for a CEO of the handset business. Motorola first said at the end of January that it was exploring a possible restructuring that could involve the sale or spinoff of its troubled handset business. The company says the spin will take the form of a tax-free distribution to shareholders, and it expects the process to occur some time in 2009.
Icahn has been pushing for some sort of break up for quite some time now, though it remains to be seen whether this will be satisfactory to him. Following the January announcement, there was talk that the company could sell the handset business to another maker, though given the weakness in this business, it was not clear if anyone could actually step up to buy it.
The revenue split is pretty even between the two units: According to the company’s 2007 10-K, the mobile devices business had revenue of $19 billion for the year, representing 52 percent of total net sales of $36.6 billion. The Broadband & Mobility Solutions business has previously been categorized as two units: Home and Networks Mobility and Enterprise Mobility Solutions, which did a combined $17.7 billion in 2007 revenue. In terms of operations, Mobile Devices is pretty straight forward: the devices, accessories and related software. The solutions side includes includes a variety of lines, including set-top boxes, wireless infrastructure, broadband infrastructure and IP video.
From the Release: “Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors,” said Greg Brown, Motorola’s president and chief executive officer. “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.”
The market likes the move: shares are up about 7 percent pre-market.
The company will hold a conference call at 8:30 ET to discuss the split. Webcast
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