At least one notable investor is expecting a windfall after Motorola splits the company into two next year.
Since the start of 2010, billionaire investor Carl Icahn has boosted his stake in Motorola to 203.3 million shares, or around 8.8 percent of outstanding shares, from 119.8 million at the end of 2009, according to an SEC filing.
A person familiar with the matter told The Wall Street Journal (subscription required) that Icahn believes his investment will jump next year after Motorola splits itself into two separate companies. "He perceives there is value to be unlocked," the Journal quoted its source.
Following pressure by Icahn and other investors, Motorola announced its intention in 2008 to separate itself into two different, public companies--one to focus on mobile devices and home entertainment products, the other to concentrate on enterprise mobile solutions and network businesses. Current Motorola co-CEO Sanjay Jha will run the mobile device and home entertainment company, while his fellow co-CEO, Greg Brown, will manage the enterprise business.
Icahn's relationship with Motorola management has been contentious, to say the least. After initially buying up a number of shares in 2007, Icahn felt the company's weak financials were depressing the stock price and lobbied for a seat on the board.
At the same time, the billionaire was battling Motorola to get certain legal documents to prove his point that the board should have been doing more to fix the floundering mobile phone business. Icahn urged the board to consider separating the mobile phone operations from the rest of the company.
After a drawn-out proxy fight in which Icahn wanted four people of his choosing on the board, Motorola placated the investor by giving two of his recommendations positions on the board.
Since then, Motorola has experienced a bit of a resurgence. Thanks to the popularity of its Droid smartphone sold through Verizon Wireless, the company surprised investors and analysts with better-than-expected earnings for its first quarter.
But despite the improved financials, Motorola still plans to separate itself. Brown told Dow Jones Newswires and The Wall Street Journal he believes the split is the best move for the company and one that will deliver greater shareholder value than if Motorola stayed in one piece.