By Gary Kim, Contributing Editor
Motorola’s (News – Alert) planned split into two companies — the radio infrastructure division in one company and the mobile division in another — will feature a shift of debt and pension obligations to give the mobile company a fighting chance at growth, as well as making it a more-attractive acquisition target, according to the Wall Street Journal.
The breakup of Motorola is expected to occur in 2011. Motorola is planning to buy back most of its debt and give the bulk of its remaining cash — roughly $3 billion to $4 billion — to a new company centered on the mobile unit. The Schaumburg, Ill., company would also free the mobile phone company of pension liabilities and most other obligations, a move intended to free the mobile company of overhead. The mobile phone unit will need the help, as it has lost about $5 billion over the past three years, amid slumping sales, as its devices have been eclipsed by Apple (News – Alert) and others. The revenue woes have forced the company to slash 15,000 employees since 2007. Under the current plan, Motorola would spin out the mobile phone division and the profitable cable set-top box business into a new company called Motorola Mobility. The remaining company, to be called Motorola Solutions, would be given the rest of the cash and take on pension obligations and most other liabilities, according to people familiar with the matter. Motorola has to be careful not to leave the Solutions unit with too little cash, which could saddle it with low investment-grade credit ratings and raise its cost of borrowing. That half of the company, which makes public safety radios, handheld scanners and telecommunications network gear, currently generates nearly all of Motorola’s cash. Those divisions, led by co-Chief Executive Greg Brown (News – Alert), reported $11.1 billion in revenue last year. Their improved performance pulled the whole company back into the black in the first quarter. Motorola, which once made one out of every five cellphones sold around the world, has seen its market share drop to about three percent after the firm failed to follow up with another hit device after the Razr. Motorola Mobility also will own a sizable set-top box business, but mobile devices are where the company will live or die. Though Motorola is one of two mainstay set-top suppliers to the U.S. cable industry, that business is mature and not expected to grow much, if at all. That puts all the burden of growth on the mobile device part of the business.
Gary Kim (News – Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by Marisa Torrieri
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