Motorola May Spin-Off Handset Unit

EnterpriseFinancial MarketsMobility

Motorola originally announced the plan more than a year ago, but the slumping economy forced it to shelve the idea

Motorola’s on again, off again spin-off of its troubled handset unit might be on again, according to Oppenheimer analyst Ittai Kidron.

In a research note published on 17 April, Kidron speculated that “management could revisit the planning process for the Mobile Device spin off in the near future, which would signal growing confidence in the upcoming [handset] portfolio and raise the likelihood of unlocking the unit’s value.”

Kidron predicted Motorola is likely to hit its first-quarter numbers, giving new momentum to a sale of its handset unit.

Kidron’s speculation is only the latest about the ultimate fate of Motorola’s cell phone business. In March, the Financial Times reported at least two private equity firms are investigating the possibility of buying Motorola’s failing handset unit and combining it with assets cherry-picked from telecommunications supplier Nortel’s bankruptcy proceedings.

More than a year ago, Motorola announced it planned to spin off its ailing handset division, but the economy went south and the crumbling credit markets rendered the grand plan moot. Faced with hard reality, Motorola began cutting jobs, axing approximately 3,000 workers in the fourth quarter of 2008 alone.

Then things really turned bad. The job cuts didn’t stanch the bleeding, and sales continued to tumble, with once-proud Motorola falling to fourth place among handset makers behind market leaders Nokia, Samsung and LG. Motorola took the next inevitable step 14 Jan, announcing that another 4,000 employees—3,000 in the handset division—would be given immediate pink slips.

Sanjay Jha, the co-CEO of Motorola who was brought in from Qualcomm in August of last year to lead the now failed spin-off, said in January he hoped a commitment to and a leap of faith with Google Android and Microsoft Windows Mobile as Motorola’s future operating systems would turn the tide for the company. Jha said in October 2008 that Motorola would ditch at least four operating systems, including Symbian, to focus on developing midtier phones running Android and high-end enterprise devices operating on Windows Mobile.