Motorola: stand-alone device biz possible

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Motorola: stand-alone device biz possible


By Phil Carson
Story posted: January 31, 2008 - 6:18 pm EDT

Motorola Inc.’s CEO Greg Brown today said the company is exploring options to accelerate the recovery of its mobile devices business, including the possible creation of a standalone devices business.

Rumors circulated among market analysts earlier this week that Motorola might consider selling off its mobile devices business, which a year ago was its most-profitable business.

Motorola’s statement appeared to reflect that Brown and his board decided to acknowledge discussions aimed at reviving the company’s fortunes and quell rumors.

Analyst Tero Kuittinen of Avian Securities L.L.C. said, however, that the statement “is likely to provoke speculation -- and maybe that’s its purpose.”

“Motorola’s device business has always been volatile, while its other businesses are more stable,” Kuittinen said. “I don’t think an outright sale is likely. But a joint venture, perhaps with private equity, might be a good solution.”

Kuittinen pointed to Sony Ericsson Mobile Communications as an example of a joint venture that wedded two struggling device businesses and, after a difficult adolescence, became a profitable player.

“I’m sure they (Motorola) are also considering ditching their ‘connected home’ business,” the analyst said.

Motorola’s mobile devices business, which typically has generated more than half the parent company’s revenue and profit -- and is most closely tied to the company’s identity -- has also contributed the lion’s share of the company’s recent woes. Motorola reported Jan. 23 that it had an 84% drop in net income in the fourth quarter and expected a first quarter loss. The device business saw a 38% drop in revenue over the year-ago quarter and its market share flagged to 12% from nearly double that a year ago.

The company’s stock has lost 33% in value in the past year, according to The Wall Street Journal Online.

However, Motorola’s stock was up more than 10% in after-hours trading following its announcement today.

The company is under no legal obligation to disclose its internal discussions until or unless a decision is made, according to Dan Konigsburg, a corporate governance specialist at Standard and Poor’s.

Indeed, the last paragraph of Motorola’s terse, three-paragraph statement, delivered after the close of trading today, said that the company would not discuss further developments “unless or until” its board approved a definitive transaction “or the process is otherwise complete.”

“There can be no assurance that any transaction will occur, or, if one is undertaken, its terms or timing,” the statement concluded.