When One Becomes Two: Motorola Splits into Two Independent Companies

by Anton Shilov
03/26/2008 | 06:45 AM

Motorola, a leading maker of communication equipment, on Wednesday announced that the company’s board of directors has commenced a process to create two independent, publicly-traded companies. As a result of the split one company will focus on making handsets and supporting technologies for end-users, whereas the other will concentrate on solutions for businesses and public services.

“Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors. Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus – as well as more targeted investment opportunities for our shareholders,” said Greg Brown, Motorola’s president and chief executive officer.

Based on current plans, the creation of the two stand-alone businesses is expected to take the form of a tax-free distribution to Motorola’s shareholders, subject to further financial, tax and legal analysis, resulting in shareholders holding shares of two independent and publicly-traded companies:

• The Mobile Devices business is an industry leader in multi-mode, multi-band communications products and technologies. The business designs, manufactures and sells mobile handsets and accessories globally with integrated software solutions that incorporate the latest personal communications technologies. It also licenses a portfolio of intellectual property.
• The Broadband & Mobility Solutions business includes Motorola’s Enterprise Mobility, Government and Public Safety, and Home and Networks businesses. These businesses manufacture, design, integrate, and service voice and data communication solutions and wireless broadband networks for enterprises and government and public safety customers worldwide. These businesses also provide end-to-end digital and Internet Protocol (IP) video solutions, cellular and high speed broadband network infrastructure, cable set-top receivers, and associated customer premise equipment for residential and commercial wireless network system access.

The decisions follows the company’s long-time intention to spin-off money-losing mobile phone business into separate company.

The completion of any separation transaction would be subject to certain customary conditions, including implementation of inter-company agreements, filing of required documents with the Securities and Exchange Commission and receipt of an opinion of counsel or a ruling from the internal revenue Service as to the tax-free nature of any transaction.

Motorola expects that the separation of its businesses, if consummated, would take place in 2009. The company noted that there can be no assurance that any separation transaction will ultimately occur or, if one does occur, its terms or timing.