Motorola Starts New Year with Company Split

by Jeff Wiener on December 2, 2010

It’s been a long time coming, but Motorola has finally announced that on January 4th, 2011, it will officially split into two separate companies: the new Motorola Mobility Holdings and the old Motorola; now renamed Motorola Solutions.

The decision was first broached as a way of satisfying disgruntled investors and responding to diminished mobile sales back in 2008, but since then things have changed just a little, as Motorola now enjoys steady mobile profitability as it produces a handful of the world’s most popular Android phones.

So with Motorola’s mobile division fully recovered, is such a split still necessary? With shares jumping as much as 7 percent upon the official release of the date of the company split, you can bet investors are happy about it, which just leaves the question; will anyone still care about the old Motorola Solutions?

For some time now Motorola has been operating with two co-CEOs; Greg Brown and Sanjay Jha. With the coming split Brown will assume control of Motorola Solutions, which will now control the company’s assorted non-phone related business, including bar-code scanners, walkie-talkies, and various other emergency communications equipment. Jha—who has seemingly won the lottery in this deal—will run the newly created Motorola Mobility Holdings, which will control the company’s phone and set-top box businesses, and with several dominant phones as part of Motorola Mobility’s catalogue, does anyone else feel a little sorry for Greg Brown?

“Today’s announcement marks another important milestone toward the upcoming separation that is expected to benefit Motorola, its stockholders, as well as each company’s respective customers and employees,” Brown and Jha said in a joint statement. “We look forward to taking advantage of the opportunities before us as we begin the new year as two independent, publicly traded companies.”

For investors the split breaks down like this: Original Motorola investors will receive one share of the new Motorola Mobility Holdings Inc. stock for every eight shares they now own. Immediately following, the company announced, it will swap seven old shares in Motorola for one share in the newly renamed Motorola Solutions, a move that will boost the stocks’ value by a proportional amount intended to increase both companies overall marketability.

But even if the split has short term benefits for the company, its stockholders, and perhaps Motorola customers, will either business be able to survive independently? There’s no question that with the arrival of Android Motorola has managed to resuscitate its nearly dead mobile division, but without the support of a multi-faceted stable company to buoy its mobile division, how long will Motorola Mobility be able to survive on its own? I can only say that they just better hope Android continues to be popular.

For its part, the original Motorola Solutions and its new CEO Greg Brown seem to really have got the short end of this deal, as Motorola’s flashy, powerful, and popular mobile devices gave the company significant amounts of credibility in various other markets. Without that hype, will Motorola Solutions be able to survive with a relatively small niche emergency services clientele?

In the end, it’s clear that this split was devised as a way of responding to a problem that Motorola no longer has. That being said, while it’s obvious that dividing the company into two separate publicly traded entities will benefit stockholders in the short term, it remains to be seen whether or not the two companies can survive on their own.

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