Bowing to months of pressure over its struggling handset unit, Motorola says it will split its business into two separate, publicly traded companies. In an announcement that sent the company’s shares up by 10%, Motorola CEO Greg Brown said the firm will separate its loss-making mobile division from its other business.
Under the plan, to be completed by 2009, Motorola will split into its Mobile Devices unit on one side, and its Broadband & Mobility Solutions – which covers network equipment, enterprise and public safety businesses – on the other.
This, says Brown, will boost flexibility, focus and investment opportunities. Brown added that the company is looking for a new CEO to head the mobile devices business.
Motorola’s announcement comes amid an escalating proxy battle with investor Carl Icahn. Motorola’s second-largest shareholder has been pushing the company to sell or spin off its mobile unit, while trying to nominate four directors to the board. Earlier this week, he filed a suit against Motorola to force it to disclose documents, which he claims will show proof of mismanagement and justify his efforts.
Motorola admitted in Feb that it was considering spinning off or selling its mobile unit, after facing months of intense pressure by shareholders to turn over the business.
The US manufacturer has struggled to retain its lead as a leading handset maker in the past year, seeing its share of the world’s mobile phone market fall from 23% to 13% in terms of units sold, according to IDC.
Despite a drastic restructuring which involved cutting 7,500 jobs and the appointment of Brown to replace Ed Zander, the company posted an 84% drop in its Q4 profits, and warned that it would still run at a loss in the current quarter.