Split Decision: Is Motorola's Break-Up For The Best? - InformationWeek

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3/26/2008
11:19 AM
Eric Ogren
Eric Ogren
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Split Decision: Is Motorola's Break-Up For The Best?

Motorola has finally decided that keeping the company together is no longer best for shareholders. Its mobile device division has long been plagued by weakness and has operated in the red for the better part of a year. But is lopping off the gangrenous limb the best move to save the company?

Motorola has finally decided that keeping the company together is no longer best for shareholders. Its mobile device division has long been plagued by weakness and has operated in the red for the better part of a year. But is lopping off the gangrenous limb the best move to save the company?Honestly, I would prefer that Motorola simply take every antibiotic it can and try to stave off the infection that's tormenting the mobile devices limb. But I am no Carl Icahn, who seems hell bent on forcing the company to fix its financial woes. He is waging a proxy battle against the company, and has proposed a slate of four directors to the board. He also is suing Motorola to force it to hand over documents related to its mobile devices business.

Motorola's board and executive team feel that separating the strong portion of the company -- its networking equipment and enterprise devices business -- from the weak portion is the way to go. When Motorola acquired Symbol Technologies several years ago, it inherited a company with strong ties to the enterprise. Even though Symbol was plagued by its own financial difficulties in the earlier part of this decade, the two companies have, by all appearances, made themselves into a cohesive unit. It has been one factor keeping Motorola operational and has emerged as the stronger side of the business.

We all know about Motorola's handset woes. Something must be done. But what is gained by separating the company? Motorola said the creation of two companies would improve flexibility, increase management focus, and provide more targeted investment opportunities for shareholders. But who's going to invest in the handset division right now? How will existing shareholder assets be divided? Will they have a choice which portion of the company their investment goes to? Right now, the mobile device division doesn't look like the best investment to make.

I have to disagree with Motorola's belief that separating out the handset unit will help it focus better. Think about its two closest competitors: Nokia and Samsung. Both companies are huge in scale, and operate multiple, disparate business units successfully. Why can't Motorola do the same?

The blame can only be with management. Not that I advocate anyone losing their job, but Motorola needs to bring in new managers who have a different vision for the mobile device division and can do something with the talented engineers who work there.

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