Motorola to split into two companies

Motorola mot, which invented cellphone technology more than 30 years ago and sparked a global revolution that continues to this day, is splitting into two companies.

One will cover the cellphone handset business, including the RAZR and other wireless devices. The other company — the part of Motorola that is profitable — will cover the networking equipment and other gear designed for big broadband carriers such as Sprint as well as government and corporate customers.

Motorola shareholders will get stock in both companies. The tax-free deal is expected to close in 2009 if approved by the Internal Revenue Service.

Once a global leader in wireless handsets, Motorola today is a faraway No. 2 to Nokia, which continues to churn out cool new products with dizzying speed.

And Motorola? It hasn't had a big hit since the RAZR, which debuted in late 2004. Motorola was slow to respond to the trend towards feature-packed "smart" cellphones, leaving it with no competitive answer to the hugely popular Apple iPhone.

Greg Brown, Motorola's CEO, acknowledges the problem. "We have been inconsistent with the overall performance" of the cellphone business, he told USA TODAY. "We need to refresh and extend the product portfolio to improve our global position."

Asked how a big split will fix that problem, Brown peels off in another direction — the just-launched hunt for a CEO for the handset company.

"The structural bifurcation enables and facilitates the search for a CEO candidate" for the device division, he says.

In short, Motorola is hoping somebody else can.

News of the split didn't shock Wall Street. Shortly after Brown was named CEO in January, Motorola announced that it was considering a range of strategic possibilities, including the sale of the handset division. Motorola got no takers.

Brown, who had been chief operating officer, says the unit was never for sale. "We never had a 'For Sale' sign on the mobile business," he says.

Analyst John Jackson of Yankee Group says the split is a bitter turn for Motorola's storied handset business: "They can't sell it and they can't fix it."

"This indicates there are no viable strategic partners or buyers in the offing," he says.

Ellen Daley of Forrester has a different take. "This is good news," she says. "This allows the mobile device business to catch up."

It remains to be seen if the split can fix what ails Motorola. The company, one of the grand names in global communications, wireless, in particular, has been bleeding talent and market share for years. Attempts to juice up creativity within the division have fallen flat.

But it may take care of a short-term problem: Carl Ichan.

The former corporate raider, who owns 6% of Motorola stock, has been pushing management to split the company — as it is now doing — to help boost the stock price. He's also threatening a lawsuit, and has openly accused management of providing weak leadership.

Brown says Ichan was not a factor. "This is not a result of Carl Ichan," he says flatly. "This is the result of the work we launched on Jan. 31, and today's announcement finishes that review."