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Motorola Plans to Separate into Two Companies (2/11/10)
Motorola’s mission-critical communications business will be a separate company by early next year under a plan unveiled Thursday. Motorola is targeting the first quarter of 2011 for a planned separation 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, which includes two-way radios and associated equipment.
Greg Brown, co-CEO of Motorola, will serve as CEO 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, radio frequency identification (RFID) and wireless network infrastructure.
“We are the leading mission- and business-critical technology solutions provider with a commitment to innovation,” Brown said. “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.”
Dr. Sanjay Jha, co-CEO, will serve as CEO of Motorola's mobile devices and home businesses. This business will offer a portfolio of mobile converged devices, digital entertainment devices in the home, and end-to-end video, voice and data solutions.
Following the separation, 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, a company statement said.
One research group said the separation will further enhance Motorola's mobile radio division. "Last year, sales for the enterprise mobility solutions group represented $7 billion; a key element of this was its mobile radio business," said Jatinder Thandi, research analyst with IMS Research. “Looking ahead, the mobile radio industry is going through a large-scale migration from analog to digital. Motorola is in an excellent position, having a large portfolio of digital technologies that cater to all end-users and key intellectual property rights (IPR) that will enable it to continue its dominance of the mobile radio industry.”
The separation is planned 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 address future opportunities, a company statement said. Motorola expects that, post-separation, the enterprise mobility and networks business will be capitalized to achieve an investment-grade rating and will be the entity responsible for Motorola's existing public market debt at the time of separation.
The proposed tax-free spin-off is expected through a pro rata distribution to Motorola shareholders. Completion of the spin-off is subject to a number of conditions.
“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.”
The Motorola statement said there is no assurance that any separation transaction will ultimately occur and no assurances as to its terms or timing.
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