Motorola to Split into Two Companies

Motorola has decided to cut itself in two, separating its money-losing handset division from the rest of its business.

Motorola has announced it will split itself into two separate, publicly-traded businesses, one (Mobile Devices) focussed on mobile handsets and one (Broadband & Mobility Solutions) assuming the rest of Motorola’s current business operations. The move is designed to separate off Motorola’s money-losing handset business from the rest of the company’s operations, and may be a prelude to the cell phone business finding an investment partner or becoming part of a joint venture.

“Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors,” said Motorola president and CEO Greg Brown. “Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus—as well as more targeted investment opportunities for our shareholders.”

The decision to split the company in two comes ahead of an annual shareholder meeting scheduled for May 5. Motorola is also facing an increasingly aggressive proxy battle for control of the company from investor Carl Icahn, the company’s second largest investor.

Motorola is currently the world’s number three handset maker.

The company has not revealed any branding details of the new businesses, save to indicate the “Motorola” brand is valuable to the mobile devices business. The split will take the form of a tax-free distribution to shareholders and should be completed by early 2009. Motorola says it has already started to look for a new leader for its mobile devices business.

Industry watchers generally believe the move is an effort to make the mobile devices business more attractive as a takeover target or a joint venture partner, with likely buyers or partners being Asian handset makers eager to expand their presence in the North American marketplace.