Motorola Weighs New Plan to Break Up
By JEFFREY MCCRACKEN and DANA CIMILLUCA
Reuters
Signage for Motorola is displayed outside their office building in Tempe, Ariz.
Motorola Inc. is close to rolling out a new plan that it hopes will revive a long-suffering effort to separate the company's main business units, according to people familiar with the matter.
In recent days the Schaumburg, Ill., company has moved toward reversing a months-old strategy of selling off the largest of its three divisions, which makes set-top boxes and wireless-networking gear, these people said.
The company has instead signaled it will likely chop that unit in two—continuing an auction for its wireless-networking business, while spinning off its set-top box business with its core handset business into a new, publicly-traded company, these people said.
If completed, the changes would leave Motorola at less than one-third of its current size, down to around $7 billion in sales, compared with $22 billion in 2009. What would remain is a business that sells equipment for public-radio systems and bar-code scanners.
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The decision, which still needs to be finalized, was struck over a series of high-level meetings and two days of board meetings in late January, said the people familiar with the matter. The company has struggled with what to do with a collection of businesses assembled over the decades.
As far back as 2008, the company said it wanted to spin off its handset business, but the unit's slumping sales and deep losses forced the company to put such a move on hold.
Inside Motorola, the prevailing view now appears to be that handsets and home-video equipment fit together and could help the independent company differentiate itself from other mobile-phone makers, said the people familiar with the matter.
While a spinoff of the handset unit has long been in Motorola's plans, this would be a far larger undertaking. The mobile-phone business had sales around $7 billion in 2009. The set-box unit had about $4 billion in sales last year.
Motorola would then proceed with the sale of its wireless networking unit, which makes equipment for cellphone towers and other telephony gear. Second-round bidding with management presentations for the networks business will begin soon, said these people. That business also has annual sales around $4 billion.
Without acknowledging the company's evolving strategy, Motorola co- Chief Executive Officer Greg Brown on a Jan. 29 conference call said "we are moving full steam ahead on separation" of Motorola, and added the company is "continually working on the appropriate structures for separation." When asked for a comment, a Motorola spokeswoman referred back to those comments.
Co-Chief Executive Sanjay Jha predicted on the same concference call that the handset operation would be profitable in the fourth quarter of this year, as the company rolls out a slew of new smart phones running Google Inc.'s Android operating system, putting it on a sounder footing for the spinoff.
The networking unit, which could fetch roughly $1 billion or more if sold in tact, has drawn interest from parties such Chinese telecommunications giant Huawei Technologies Co., said these people.
Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com |
