The Deal
Sunday, November 22, 
10:09 am

Motorola mulls cell phone unit spinoff

  Share     E-Mail    Discussion    Print Story

Struggling cell phone and telecommunications equipment maker Motorola Inc. said late Thursday that it is considering a restructuring to help boost the performance of its cell phone business that could include a spinoff of the unit.

The announcement follows a full year of turmoil for Schaumburg, Ill.-based Motorola, which in 2007 became the subject of a proxy battle by activist shareholder Carl Icahn who attempted to win a seat on the company's board and maintained that a dramatic shakeup was required to reverse the loss of cell phone market share.

Although Icahn was defeated in his efforts, Motorola's problems worsened throughout the year, culminating with the resignation in November of CEO Ed Zander and a warning earlier this month that it would post a first quarter operating loss due to persistent weakness in its cell phone division.

That latest financial warning stunned investors and analysts alike, many who said they had underestimated the magnitude of Motorola's troubles.

Prior to the announcement on Thursday, Motorola's stock closed at $11.50 per share, down from a 52-week high of $19.98.

Motorola said it did not plan to report developments on its search for strategic alternatives until a definitive transaction had been approved.

"We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value," Greg Brown, Motorola's new CEO, said in a statement.

At the core of Motorola's problems is its failure to hit another home run to follow its Razr phone, which was once very popular but ultimately succumbed to over exposure. Although Motorola is often regarded simply as a cell phone maker, it has extensive operations outside of this business -- including equipment to enable mobile communications and broadband connections -- and has actively grown those businesses through acquisitions.

In the wake of the company's dismal first quarter forecast earlier this month, some analysts such as Oppenheimer & Co.'s Ittai Kidron said a separation of the cell phone business seemed almost inevitable.

Continue reading below

Also on Dealscape





Post a comment




The Deal Pipeline

Deal Video


Inside The Deal: Avaya Inc.'s Mohamad Ali on the company's next target.


More video...

Crisis On Wall Street
Technology
Deals of The Decade

Community

Industry Insight

Managing your shareholder base

Growth companies and their PE sponsors should be wary of the pitfalls that arise when they layer on tiers of preferred stock.


Industry Insight

Easing the stress of distressed M&A

Corporate buyers face numerous complexities when trying to identify the right moment to purchase a distressed asset.


Editor's Note

Editor's letter: Nov. 16, 2009

Beneath the veneer of Wall Streeters beats the same heart, stirred by the same determinants of behavior.



©Copyright 2008, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.