Motorola targets first quarter of 2011 for split into two
By Chris Ziegler 
posted February 11th 2010 4:15PM
posted February 11th 2010 4:15PM
Ending a healthy spat of rumor and speculation, Motorola has confirmed today that it'll be splitting into two separate entities as of the first quarter of next year. The first of the two will form from the current Mobile Devices and Home businesses -- led by Sanjay Jha effective immediately -- with control of the phone business, set-top boxes, and "end-to-end video, voice and data solutions," while the other half will congeal out of the Enterprise Mobility and Networks divisions that are responsible for wireless infrastructure, two-way radios, public safety systems, and the like, and that will be led by Greg Brown (in other words, both businesses will retain their current leaders). The deal apparently has the support of Moto's board (a good thing to have when you're a publicly-traded company), and logically, both spin-offs will be publicly-traded as well.Here's where it gets interesting: the Mobile Devices and Home business will own the Motorola brand and license it, royalty-free, to the other company. Presumably this would be a perpetual license, but we don't have details there yet. In the meantime, Old Moto (as we'll call it for now) expects to follow through on the plan using a "tax-free stock dividend of shares in the new company to Motorola shareholders" with the understanding that both businesses will be "well capitalized" so that they "can execute their respective business plans and be able to address future opportunities." Follow the break for Motorola's official press release detailing the schism.
SCHAUMBURG, Ill., February 11, 2010 – Motorola, Inc. (NYSE: MOT) today announced the Company is targeting the first quarter of 2011 for its planned separation. Motorola intends to separate into two independent, publicly-traded companies. One will include the Company's Mobile Devices and Home businesses, and the other will include its Enterprise Mobility Solutions and Networks businesses.
Dr. Sanjay Jha, co-chief executive officer of Motorola, Inc., will serve as chief executive officer of Motorola's Mobile Devices and Home businesses effective immediately. This business will offer a comprehensive portfolio of mobile converged devices, digital entertainment devices in the home, and end-to-end video, voice and data solutions. Working with network operator partners, the company will also enable more advanced personalized services that leverage the capability of expanding wireless and wireline broadband availability.
Dr. Jha said, "The combination of Mobile Devices and our Home business brings together two highly complementary and innovative organizations. Together we will be best positioned to lead in the convergence of mobility, media, and the Internet. Our expanding portfolio of smartphones and end-to-end video content delivery capabilities will enable us to provide advanced mobile media solutions and multi-screen experiences for our customers."
Greg Brown, co-chief executive officer of Motorola, Inc., will serve as chief executive officer of Motorola's Enterprise Mobility Solutions and Networks businesses effective immediately. This business will offer a comprehensive end-to-end portfolio of products and solutions, including rugged two-way radios, mobile computers, secure public safety systems, scanning, RFID, and wireless network infrastructure.
Mr. Brown said, "We are the leading mission-and business-critical technology solutions provider with a commitment to innovation. As an independent company, we will continue to build on our long-standing tradition of strong customer relationships, leading-edge product development, quality, thought leadership, and solid financial performance."
"The board of directors supports the planned separation of Motorola into two industry-leading public companies," said David Dorman, chairman of Motorola's Board of Directors. "We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success, and enhances long-term shareholder value."
Completing the Separation
Motorola intends to effect the separation through a tax-free stock dividend of shares in the new company to Motorola shareholders. Following the separation both businesses will be well capitalized so the companies can execute their respective business plans and be able to address future opportunities. Motorola expects that, post-separation, the Enterprise Mobility and Networks business will be capitalized in a manner that will achieve an investment grade rating and will be the entity responsible for Motorola's existing public market debt at the time of separation.
Following the separation event both entities will use the Motorola brand. The Mobile Devices and Home business is expected to own the Motorola brand and license it royalty free to the Enterprise Mobility Solutions and Networks business. Additional details regarding brand, capital structure and which entity will be distributed will be provided in the future as we progress with our plans.
The proposed tax-free spin-off is expected to be accomplished through a pro rata distribution to Motorola shareholders. Completion of the spin-off is subject to a number of conditions, including, among others, confirmation of the tax-free nature of the transaction, as well as effectiveness of a Form 10 Registration Statement to be filed with the U.S. Securities and Exchange Commission ("SEC"). Motorola will distribute an information statement to shareholders following completion of the SEC's review of the Form 10.
The Company noted that there can be no assurance that any separation transaction will ultimately occur or, if one does occur, there can be no assurances as to its terms or timing.
About Motorola
Motorola is known around the world for innovation in communications and focused on advancing the way the world connects. From broadband communications infrastructure, enterprise mobility and public safety solutions to high-definition video and mobile devices, Motorola is leading the next wave of innovations that enable people, enterprises and governments to be more connected and more mobile. Motorola (NYSE: MOT) had sales of US $22 billion in 2009. For more information, please visit www.motorola.com.
Dr. Sanjay Jha, co-chief executive officer of Motorola, Inc., will serve as chief executive officer of Motorola's Mobile Devices and Home businesses effective immediately. This business will offer a comprehensive portfolio of mobile converged devices, digital entertainment devices in the home, and end-to-end video, voice and data solutions. Working with network operator partners, the company will also enable more advanced personalized services that leverage the capability of expanding wireless and wireline broadband availability.
Dr. Jha said, "The combination of Mobile Devices and our Home business brings together two highly complementary and innovative organizations. Together we will be best positioned to lead in the convergence of mobility, media, and the Internet. Our expanding portfolio of smartphones and end-to-end video content delivery capabilities will enable us to provide advanced mobile media solutions and multi-screen experiences for our customers."
Greg Brown, co-chief executive officer of Motorola, Inc., will serve as chief executive officer of Motorola's Enterprise Mobility Solutions and Networks businesses effective immediately. This business will offer a comprehensive end-to-end portfolio of products and solutions, including rugged two-way radios, mobile computers, secure public safety systems, scanning, RFID, and wireless network infrastructure.
Mr. Brown said, "We are the leading mission-and business-critical technology solutions provider with a commitment to innovation. As an independent company, we will continue to build on our long-standing tradition of strong customer relationships, leading-edge product development, quality, thought leadership, and solid financial performance."
"The board of directors supports the planned separation of Motorola into two industry-leading public companies," said David Dorman, chairman of Motorola's Board of Directors. "We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success, and enhances long-term shareholder value."
Completing the Separation
Motorola intends to effect the separation through a tax-free stock dividend of shares in the new company to Motorola shareholders. Following the separation both businesses will be well capitalized so the companies can execute their respective business plans and be able to address future opportunities. Motorola expects that, post-separation, the Enterprise Mobility and Networks business will be capitalized in a manner that will achieve an investment grade rating and will be the entity responsible for Motorola's existing public market debt at the time of separation.
Following the separation event both entities will use the Motorola brand. The Mobile Devices and Home business is expected to own the Motorola brand and license it royalty free to the Enterprise Mobility Solutions and Networks business. Additional details regarding brand, capital structure and which entity will be distributed will be provided in the future as we progress with our plans.
The proposed tax-free spin-off is expected to be accomplished through a pro rata distribution to Motorola shareholders. Completion of the spin-off is subject to a number of conditions, including, among others, confirmation of the tax-free nature of the transaction, as well as effectiveness of a Form 10 Registration Statement to be filed with the U.S. Securities and Exchange Commission ("SEC"). Motorola will distribute an information statement to shareholders following completion of the SEC's review of the Form 10.
The Company noted that there can be no assurance that any separation transaction will ultimately occur or, if one does occur, there can be no assurances as to its terms or timing.
About Motorola
Motorola is known around the world for innovation in communications and focused on advancing the way the world connects. From broadband communications infrastructure, enterprise mobility and public safety solutions to high-definition video and mobile devices, Motorola is leading the next wave of innovations that enable people, enterprises and governments to be more connected and more mobile. Motorola (NYSE: MOT) had sales of US $22 billion in 2009. For more information, please visit www.motorola.com.
Wait, what? I haven't been following this. what is going on?
@Kamil R
There will be two companies.. one Motorola and the other Motorora
For people who may freak out, I don't think any names will be changed, or anything, just Motorola would be split into two different divisions, one for consumer products, the other for more commercial products.
Someone correct me if I'm wrong
@Lucas Wait wait... I read the last part, I didn't notice it even though it had bold print... That means that Moto will be owned by someone else, but the name will stay the same, or...? I'm getting a bit confused...
@Lucas
"will own the Motorola brand and license it, royalty-free"
MOTOROLA BRAND
@Lucas
On paper, there will be 2 separate companies. The consumer products company will legally own the Motorola name, but will then "license" it to the commercial products company, to do what they want with it -- for free.
It's like on The Wonder Years, when Kevin Arnold's grandfather "sold" his car to Kevin for $1.
@Lucas there will be two companies: One selling cell phones, cable boxes, and cable infrastructure equipment. The other will sell everything else. The one selling cell phones will own the name Motorola, but the "everything else" company will still be allowed to use it free of charge.
@aroGADGET now that is a sweet reference, well done sir!
@Lucas
The way I understand it, the company Motorola will be split into 2 different companies, but both companies will still be seen by the general public as "Motorola". Though I guess they will be separate entities in the stock market.
Basically, for most people...just move on...you won't even notice when the split happens.
If anyone remembers back in the day (pre-Compaq merger) -- HP used be what is now known as HP (consumer and enterprise products + Agilent (scientific and medical instruments).
HP split and we ended up with HP and Agilent. HP then married Compaq. Agilent continues to run it's business....and some employees there would say, retains more of the original "HP Way" culture than the modern-day HP.
can anybody with an economics or business background explain why this is necessary and/or helpful? it seems that a company, that was already 2 separate divisions and functioned on their own through varied projects, is now "officially" splitting up - but keeping the same name and none is profiting from each other.
...why?
@yyandrew
They're doing it because the different divisions have different business models - 1) slow growth, small product changes over time, but dependable income public safety / radios vs 2) the highly competitive, constant change business of mobile phones. The wild card there is the cable modem business. Mobile Devices and the cable group could have worked together very well back in the days of Seamless Mobility (handset passes off the activity the user is doing to the cable box when the user walks in the house, cable box continues the activity on the home TV from there). But that never happened, and seems pretty unlikely that it's suddenly going to happen now, esp with the cable division about to hit hard times.
Or the other way to look at it: Sanjay Jha has bonus terms that require a spin off. Hmm.
@yyandrew Yes, as junktrunk said, companies often do this for stock performance reasons -- I assume Moto concluded that the "slow growth" enterprise division is "dragging down" the potential performance that the consumer division could have on its own; so they split up the two (with different business models) to perform separately. The Enterprise company would be "stability" oriented, the consumer one would be a "growth" stock.
@yyandrew
In layman term, Motorola Mobile Device basically losing money for the rest of the business. The board wants Mobile Device to split so as not to drag the other business down.. but the only time MD (mobile device) can be split is that MD has to be profitable..now, how to make a business that have been losing money for the past 4 years to be profitable? Well, maybe, just maybe with the new Android phones, it could be.. but its not fast enough.. therefore, combining it with Home Business, MD can be profitable..so its time to split.
@junktrunk
The deal with Sanjay is that he has to split the company by 2010 if not he will get his US$30m bonus..
@pointdexler
Ding! Ding! Ding! ... well summarized pointdexler. I think its going to be the same as Verizon and Verizon Wireless... two seperate companies, but everyone thinks of them as one.
Seems like they would have done this long ago
Translation.
We are sending all our IP to a new company we are forming offshore.
Therefore the US company will make almost no money so we dont have to pay any taxes
In turn we can falsly pump up profits even more for a few quarters so they CEO can get a big pile of coke for a bonus.
And everyone else in this country gets stuck with more national debt and higher taxes since motorolla effectivly wont be paying anymore taxes
@stevefazek
This is the most intelligently accurate comment I've ever read, albeit laden with disdain and contempt, which makes me like it even more. Well done.
Sanjay Jha is on a $100m total package which includes shares once Motorola is split.
The following will happen.
1) There will be a beauty contest between the Investment Banks on who will win the business to split the company.
2) Whoever wins will pocket a nice pay check and also their ANALysts will pump the stock up.
3) One year post split JHA et al will pocket their winnings and be off.
4) Naive investors will pick up the tab after the stock goes south.
As long as CEO salaries are tied to short term stock performances there will always remain the incentive to pump share prices up and then take the winnings and run.
This is a classic PUMP and DUMP strategy.
Hello Motosplit!
Next thing you know those divisions will split, and then THOSE divisions will split and then... well... We'll all have MOTOFEVER.
What a graceful and smart way to say: "We give up. Someone buy me a drink pretty please?"
So, Motorolla is splitting into two companies both called Motorolla, and they will fund each other so they can each pursue their respective businesses? Please don't turn into Sony, Motorolla.
@seangt *sigh* I see i have spelled "Motorola" wrong. >.