Motorola to split into two companies

NEW YORK -- 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."