Motorola To Split

Motorola Inc. (MOT: 7.15 +0.50 +7.52%) has finally come up with a detailed plan to split itself into two entities — independent and publicly traded. Over the last couple of years, industry circles have been ripe with rumors about Motorola’s likely spin-off.

Yesterday, management announced that the company will reorganize its entire business structure and then split into two. The proposed separation is likely to take place in the first quarter of 2011.

As a result of the business restructuring, the existing three divisions of Motorola will be converted into two divisions. These are (1) Mobile Devices and Home Businesses and (2) Enterprise Mobility Solutions and Networks Businesses.

The Mobile Devices and Home businesses will provide a comprehensive portfolio of mobile converged devices, digital entertainment devices (set-top boxes) in the home, and end-to-end video, voice and data solutions.

Enterprise Mobility Solutions and Networks businesses will provide end-to-end portfolio of products and solutions, including rugged two-way radios, mobile computers, secure public safety systems, scanning, RFID, and wireless network infrastructure.

The proposed split-up will create two independent companies each of which will inherit around half of the total $22 billion revenue of Motorola in full fiscal 2009. The split will take place through a tax-free stock distribution to shareholders.

The Mobile Devices and Home businesses will retain the Motorola brand and will license it royalty-free to the Enterprise Mobility Solutions and Networks Businesses. Motorola’s entire outstanding debt at the time of separation will be assumed by the Enterprise Mobility Solutions and Networks Businesses.

Motorola’s ailing Mobile Devices division has started showing initial signs of revival. Although the basic handset division is gradually losing market share, it has received good market traction with its two initial high-end 3G smartphones.

During the fourth quarter of 2009, Motorola shipped approximately 2 million 3G smartphones. The company announced that it will launch 20 more new 3G smartphones throughout 2010, of which five new handsets have already been launched in the current quarter.

Business restructuring will enable the Mobile Devices and Home Businesses to provide advanced mobile media solutions and multi-screen technologies leveraging on the converged platform of seamless mobility, end-to-end video content delivery capabilities, and the Internet.

On the other hand, the Enterprise Mobility Solutions and Networks Businesses will leverage the overall state-of-the art wireless broadband mobility solutions architecture of Motorola.