Motorola To Split in Two as of 2011's First Quarter

Motorola To Split in Two as of 2011’s First Quarter

Written by Kelly
February 11, 2010

Motorola Inc. (MOT) has confirmed the rumors about its makeup, with slight variations – it will become two separate, publicly traded companies.

The change is slated to take place about a year from now, Motorola said after Wall Street’s close on Thursday. The mobile devices and home businesses will comprise one unit while the enterprise mobility and networks groups will make up another.

Speculation had it that Motorola would auction its wireless networking-gear branch and then spin off the home/mobility arm.

Sanjay Jha, Motorola’s co-CEO (anyone else having an “Office” moment?), now is CEO of Motorola’s Mobile Devices and Home businesses unit, Motorola said. And co-CEO Greg Brown, meanwhile, now heads the enterprise mobility and networks division.

“We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success, and enhances long-term shareholder value,” David Dorman, Motorola’s board chairman, said in a prepared statement.

So how will Motorola pull this off? It’ll separate through a tax-free stock dividend of shares in the new companies to shareholders. According to Motorola, that means both business will be “well-capitalized.” For the enterprise unit, that should mean an investment-grade rating, Motorola said, meaning that’s the entity that’ll hold Motorola’s public market debt when the separation happens.

The Motorola brand will remain intact. The mobile devices/home business will own the brand and license it royalty-free to its frère. There are no other details when it comes to brand, capital structure or other matters as of yet.

And of course, Motorola muted its news with the caution that there’s no guarantee the separation will occur, or on the timeline presented. There are a number of regulatory approvals to reach and the market could change between now and 2011’s first quarter, leading Motorola to rethink its strategy.

Motorola’s shares closed higher on Thursday at $6.65, a .3 percent increase.