Motorola Confirms Break-Up, May Still Sell Networks

As expected, Motorola has confirmed its latest break-up plan, which involves combining its handset and set-top operations, and spinning them off. It is still unclear whether it will subsequently look to sell either of the resulting public companies.

 

Focal Points:

• The new scheme is a twist on the original aim of spinning off the handset business, headed by co-CEO Sanjay Jha. The set-top box unit is moved over from the Networks and Home Mobility business to create a combined firm spanning a wide range of devices for multimedia apps and converged services. This can address two of the 'three screens' that are at the heart of the new apps model, phones and TV - and the PC element could be added too, with Motorola planning its own offerings in the 'PC successor' space of tablets and netbooks. The firm promises to enhance services and software to create a fully unified multi-screen strategy, with Android likely to be key at all levels.
• Meanwhile, the rest of Networks and Home Mobility - mainly wireless infrastructure in CDMA, WiMAX, iDEN and LTE, plus core networks - will be merged with the enterprise networks arm.
• Motorola will break itself into two independent companies in the first quarter of 2011. Both sides will focus on a "mobility, media and internet convergence strategy" rather than specific cellco products - markets where Motorola has lost ground on both handset and base station fronts.
• Some analysts still expect the enterprise mobility business to be broken out again. Although some of the Wi-Fi products it acquired with Symbol Technologies could fit into the converged web platform, most are specific to corporate markets. The unit also includes traditional Motorola activities such as two-way radios, public safety systems and RFID, which while still strong and profitable, do not make an obvious fit with the other businesses.
• The wireless network business was still considered to be up for sale until the day before Motorola announced its new play on Thursday. Indeed, that day's edition of The Wall Street Journal, the paper that broke the two-company story, said Motorola was running a second round of bidding for the networking unit, with Huawei said to be interested.
• Under the new structure, the two arms will be renamed (yet again) - Mobile Devices and Home Businesses, led by Jha, and Enterprise Mobility Solutions and Networks, led by co-CEO Greg Brown. Motorola intends to handle the separation through a tax-free stock dividend of shares in the new company provided to Motorola shareholders. Jha's company will own the Motorola brand and license it royalty free to the Enterprise Mobility business. The iDEN business will be split between the two companies. Its main customer is Sprint, whose Nextel half was Motorola's largest client for years.
• "We are working with our wireless and cable operator partners to have advanced services and expand the broadband availability inside and outside the home," Jha said on the conference call to explain new moves. The Motoblur user interface, which is heavily geared to social networking, takes a key role - it will be expanded to include a suite of services and support new interface technologies like 3D, and Jha said it could be integrated into a home viewing experience and run on set-top boxes. This would be particularly suited to Motorola's cableco customers as they move into wireless and quad play services.

 

Also looking to sell off its final assets is Nortel, which is reported to be looking to auction all or part of its valuable wireless patent portfolio. The company said it is exploring strategic alternatives to maximize the value of its thousands of patents as part of the final stage of its restructuring from within bankruptcy protection. Canadian newspaper Globe and Mail said options include auctioning the patents, a joint venture with a new partner, or a rump Nortel firm to create long term licensing agreements. Some analysts think the patents could be worth $1bn in a bidding war because of key LTE assets.