Motorola moots sale of cellphone business

Stuart Corner
Friday, 01 February 2008 05:04

IT Industry - Strategy

Motorola has flagged the possibility of selling of its struggling cellular handset division, saying it is "exploring the structural and strategic realignment of its businesses to better equip its mobile devices business to recapture global market leadership and to enhance shareholder value." It said that alternatives could include "the separation of mobile devices from its other businesses in order to permit each business to grow and better serve its customers."

President and CEO, Greg Brown, said: "All of our businesses have exceptional people, products and intellectual property and the ability to achieve category leadership in their markets. We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise."

The extent of the business' woes were revealed when the company announced its full year results last month. Commenting on these, Martin Garner, mobile director at Ovum, anticipated today's announcement saying: "Given the length and depth of the handset problems, it's increasingly difficult to see why shareholders should see logic in keeping the divisions together.  Are there really valuable synergies between the other divisions and a handset business that is in such difficulty? Or would it be better to break the company up?"

He added: "There has been speculation about who might buy the handset division. We think that a sale is unlikely. But there might be interest in a Sony Ericsson style joint venture."

Of the result Garner said: "what is horrifying is the lack of optimism. This suggests that there was not enough useful new product in Motorola's cupboard (possibly some products in the pipeline have been cancelled) and [former CEO] Ed Zander's mid-2007 recovery bet has gone wrong.

"The handset volumes are well below Motorola's normal seasonal pattern. Greg Brown pointed to heavy competition, gaps in the portfolio (3G, China and other emerging markets), new product development being late and weakening demand for existing products (KRZR, RAZR2). On the latter, it's not clear if this was driven by US consumer conditions."