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Motorola mulls cellphone unit spinoff

Motorola, which in recent years has been unable to capitalize on the success of its popular Razr phone, said on Thursday that it was exploring the possibility of selling or spinning off its cellular phone business as a way to make the company more profitable.

But executives stopped short of saying what exactly they would do, although there has been speculation that Motorola would either spin off its cellphone unit, or keep it and sell its other businesses.

"I don't want to preordain how or if it happens," Donald McLellan, a senior vice president for corporate strategy, said, referring to Motorola's announcement. "This is genuinely an exploration. Not more than that."

The other businesses include a unit that builds wireless networks and one that makes television set-top boxes and modems.

The company's announcement was prompted, McLellan said, by a stock price that was "unacceptable at these levels."

Motorola's shares dropped 18.8 percent in one day last week when the company announced a decline of 84 percent in fourth-quarter profit and warned of challenging months ahead. For the year, the share price had fallen to US$11.50 on Thursday, from a 52-week high of US$19.98. After the company's announcement, the stock rose more than 10 percent in after-hours trading.

Cellphone production is the largest division of the company, with US$18.99 billion in net sales last year, a 33 percent decline from a year earlier.

The other two units -- set-top boxes and communications equipment for businesses -- are smaller but profitable.

"The question is," said Roger Entner, a senior vice president at IAG Research, "will the real Motorola please stand up?"

For shareholders, the question is whether Motorola, based in Schaumburg, Illinois, is offering too little too late.

The company has been under pressure from the investor Carl Icahn, who led a fight for a seat on Motorola's board because he thought that management had not done enough to increase the price of the stock. While he was unsuccessful, his complaints in part prompted the departure of the chief executive, Edward Zander.

Icahn has urged Motorola's executives to split the unit from the rest of the company.

He said on Thursday in a statement that he was "pleased to see that Motorola is finally exploring that proposal."

"We believe Motorola is finally moving in the right direction," he said, "but certainly still has a long way to go."

The announcement, however, would not deter him from nominating a slate of directors at the next annual meeting, Icahn said.

Chief executive Gregory Brown, who took over this month, faces the challenge of slowing losses in market share to rivals like Samsung Electronics and Apple.

Phone shipments plunged 38 percent last quarter as Motorola lost customers to the iPhone from Apple and camera phones from Samsung, bringing Motorola closer to losing its spot as the third-largest handset maker in the world.
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