Motorola will split up in Q1 2011

Motorola will be split into two publicly traded companies in the first quarter of next year, with one focusing on handsets and home entertainment devices and the other on making enterprise communications gear, the company said.

The company's two co-CEOs, Sanjay Jha and Greg Brown, will lead the two new entities. Jha was named CEO of Motorola's Mobile Devices and Home businesses, effective immediately. Brown was immediately named CEO of the Enterprise Mobility Solutions and Networks businesses.

The company plans to carry out the separation through a tax-free stock dividend of shares to current shareholders. The Mobile Devices and Home entity will own the Motorola brand and license it royalty free to the enterprise business, Motorola said.

The board of Motorola supports the breakup plan, according to Motorola's news release.

Motorola today is divided into three businesses: Mobile Devices, Enterprise Mobility Solutions and Home & Networks Mobility. The latter makes TV set-top boxes, end-to-end video systems, and infrastructure for cable, wireline and mobile operator networks. The planned reorganization would split Home & Networks Mobility, shifting its home systems business to the new cell-phone maker and carrier infrastructure to the enterprise business.

Motorola's handset operation, its biggest business, has been lagging behind other parts of the company as it struggles against growing competitors such as Apple. The company has been talking for years about separating this unit, which competes in the consumer arena, from other Motorola businesses that sell to enterprises and carriers. In the fourth quarter of 2009, the handset business had an operating loss of US$132 million, though that was an improvement from a $595 million loss a year earlier.

“As independent companies with focused management and operational and strategic flexibility, each company has a better opportunity for success in their respective industries and the creation of long-term shareholder value,” Brown said on a conference call following the announcement.

By combining mobile devices and home entertainment equipment, such as TV set-top boxes, Motorola hopes to provide “multiscreen” experiences in which users consume content on phones, other mobile devices, and home entertainment equipment, Jha said. They can even have similar user interfaces across these platforms, he said. Motorola has already adapted its MotoBlur social media interface from handsets to set-top boxes, Jha said. At the International Consumer Electronics Show last month, the company demonstrated a device it called the Mover, which shifted digital content from a set-top box to mobile devices.

“Consumers will enjoy uniform experiences for discovery, consumption, creation and sharing of content, as well as social collaboration and connectivity, anywhere, anytime,” Jha said.

The Enterprise Mobility Solutions and Networks business will include Motorola's carrier infrastructure products along with public-safety communications gear and enterprise infrastructure, such as combined mobility and wireless LAN systems, Brown said. Separating the mobile carrier equipment business from handsets makes sense because, among other things, all the carrier and enterprise products are sold on a long lead time and involve complex integration work, he said.

North America will be the biggest market for both new businesses, as it is today, while Motorola also has a strong position in Latin America and sees growing opportunities in China and Europe, the company said.

On Wednesday, the Wall Street Journal had reported that Motorola was considering selling its wireless network equipment business while combining the handset and set-top-box units.

Motorola announced the upcoming split far in advance to give customers, employees and investors time to prepare for the realignment, the executives said. The company said it was not changing its financial forecast, which calls for a loss in the first quarter of this year. But it still expects to turn a profit in its handset business by the end of the year, with 20 new models coming out this year, according to Jha.

Jha dismissed a question about what might derail the company's plans between now and next year, though the company's news release notes the move is subject to a number of conditions, including confirmation that the transaction can be made tax-free. In addition, Motorola has not yet determined which part of the company technically will be spun off and which will be formed out of today's Motorola.

“We're fully committed to making this separation,” Jha said.