MOT & Some APL comments:
March 26, 2008, 10:38 am
Split Personality: Will A Motorola Break-Up Help?
Posted by Heidi Moore
Will the split-up of Motorola help the beleaguered company? Or is it just a cosmetic rearranging meant to appease activist Carl Icahn?
Icahn held 6.3% of Motorola’s stock as of early March and has been making the most of it. Hehas been pushing Motorola to sell off or separate its money-losing mobile devices unit, which makes phones like RAZR and has been trying to salvage some market share from the onslaught of Research In Motion’s omnipresent BlackBerry. Earlier this week Icahn rejected Motorola’s offer of two board seats as he chased bigger fish: board documents related to the mobile devices unit. As per his usual playbook, Icahn has attacked Motorola both from the front with his attack on mobile devices as well as from the flank, with a battle about executive pay.
There is no question that Motorola’s mobile device unit has been in trouble, and that the trouble has leaked into the company itself, potentially prompting the death of an American icon. Motorola has seen an exodus of top executives.
But will the separation of this company actually be a good thing for Motorola? What Icahn wanted most of all was new leadership for the handset division; Deutsche Bank analysts today also said the best part of the split-up is the promise of new management for handsets. That could have been achieved without a spinoff. And for the next year, the spinoff is bound to cause some confusion as Motorola tries to get its house in order, and Deutsche today pointed out that one big question is which part of Motorola will get the fancy, beloved Batman-like Motorola corporate logo and brand. (The natural answer is that it goes with the phones.)
And then there’s the issue of value. Despite the handset business’s strategic struggles, it is still worth a lot. Cowen & Company analysts today estimated the value of Motorola’’s handset business at around $4 billion, based on the number of units sold.
And although the handset unit ran a $1.2 billion operating loss last year, it also brought in $18.99 billion in annual sales — half of all Motorola’s sales. That’s a high price to pay for a few new executives.
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Well, we’re back up and running now with news that respected analyst firm Gartner believes Apple has just placed an order for 10m 3G capable iPhones with OLED (Organic Light Emitting Diode) displays.
The speculation tittle tattle news was broken specifically by Ken Dulaney, a senior analyst at the firm, in a conversation with the iPod Observer and he believes the relatively disappointing sales of the original EDGE-equipped handset in Europe (where 3G is more prevalent) has lit a fuse under Apple.
Interestingly, Dulaney claims the introduction of an OLED display (a new rumour on us) would facilitate the swap to 3G since the technology has substantially less power draw than traditional screens and also requires less space. This would address both Apple’s initial concerns about 3G: that it would substantially drain battery life and bulk up the handset.
So where do we stand on this? Well, OLED aside, it seems painfully logical. The hot month for an announcement is June since it marks the formal launch of the App Store and the handset’s one year retail anniversary. Of course 1 + 1 doesn’t always equal 2 in IT land so, as ever, consume your pinches of NaCl, but keep fingers surreptitiously crossed.
Comment by Too little too late... - March 26, 2008 at 10:44 am |
