Motorola split in two

Motorola is hoping to save itself by splitting the business in two, a move that it hopes will bring it out of its crisis. The mobile phone manufacturer and telecommunications equipment vendor wants to split itself into two separate companies, a handset company and corporate services concern. Motorola announced today at its corporate headquarters in Schaumburg, Illinois that both independent corporations would be listed separately on the stock exchange.

The mobile phone business, which spiraled into crisis after a period of high flying successes, dragged Motorola into the red last year. Motorola has already been forced to concede its seemingly secure place as the world's second-largest mobile phone manufacturer after Nokia to Samsung; in the fourth quarter of 2007 its market share dropped 38% over the previous year. Shareholders, among them notable investor Carl Icahn, have been demanding a corporate split for some time. He even brought a court action against Motorola in recent days to force them to release company documents, in order to support his criticism of the Motorola management and his demand to spin off the mobile phone business.

Apart from its mobile phone division, Motorola does a profitable business in television set-top boxes, as well as mobile communication networks and communications technology for corporations. Current Motorola shareholders will receive stock in both companies. The split is expected to take place in 2009. Corporate head Greg Brown, in office since the beginning of the year, announced his intention to reassess Motorola's strategy and to introduce radical cost-cutting measures, but he ruled out selling the mobile phone division. But according to the Motorola boss, the decision to split the company did not result in a change of priorities. His intention was to continue to improve the situation of the mobile phone business with competitive products. He expected that the mobile phone division, as an independent company concentrated on its core business, could win back its place as a market leader.

Investors have apparently embraced the current plans: Shares in Motorola were up 6% ahead of the New York Stock Exchange opening bell this morning. After closing at 9.76 US dollars yesterday, the share price had climbed to 10.33 US dollars by 8:00 a.m. New York time.