Feb 01
Motorola Considers Breakup, Phone Unit Sale
Chicago, IL — Feb 01, `08 — Motorola, which created and dominated the worldwide cell phone market, on Thursday announced it may shed that iconic business amid a breathtaking decline in sales and mounting losses in the past year.
Its shares — already down as about 55 percent since mid October 2006 — were up $1.18 at $12.71 after some analysts raised price targets for the company and Citigroup upgraded its rating of the stock to ‘buy’ from ‘hold’ after the news.
The world’s third-largest mobile phone maker, which has been losing market share to market leader Nokia and Samsung, said late Thursday it was “exploring the structural and strategic realignment of its business to better equip its Mobile Devices business to recapture global market leadership and to enhance shareholder value.”
While that may signal Motorola is putting its $19 billion cell phone unit on the block, the firm also might instead sell one or both of its other major business lines — one for TV set-top boxes and network equipment, and another that makes mobile equipment for governments and large businesses. It also could decide to keep the firm intact.
“We don’t want anyone to be misled that we’ve preordained” a plan, Don McLellan, Motorola’s head of mergers and acquisitions, said in an interview. “This announcement is about equipping mobile devices with a way to achieve its leadership again.”
Even a breakup of the troubled company may not head off another proxy fight with billionaire financier Carl Icahn. Motorola, which fought off Icahn’s bid for board seats and a drastic overhaul just a year ago.
The revised strategy comes just one month after Greg Brown succeeded Ed Zander as CEO and a year and a day since Icahn initiated a proxy fight to shake up a company that was already in the throes of a severe decline in sales and profits. After grabbing world market share of 23 percent in 2006 on momentum led by its Razr phone, the company has lost nearly half that as rivals outpaced it with successful new products.
Motorola prevailed in last year’s proxy battle. But with the end of its slump nowhere in sight, it has dropped its opposition to splitting off or shedding its core business.
Icahn, while “pleased” to hear that Motorola is exploring his proposal, nevertheless still plans another fight for board seats this spring, as he said he had warned the company recently.