Updated 7:35 AM PDT. News.com's Richard Defendorf contributed to this story.
Under pressure from investors, Motorola has decided to split into two publicly traded companies, one handling handsets and accessories and the other taking on wireless broadband networks and enterprise-level communications 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 advisers," CEO Greg Brown said in a release. "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."
The Mobile Devices business will handle the designs, manufacturing, and sales of mobile handsets and accessories, and will license a portfolio of intellectual property. The Broadband & Mobility Solutions business will handle voice and data communication solutions and wireless broadband networks for enterprises and governments. It will also handle IP video, cellular, and high-speed broadband network infrastructure, and cable set-top receivers.
Brown said a search for a chief executive for Mobile Devices is under way.
Although the Mobile Devices division generated sales in 2007 virtually equal to those of the company's other two divisions, it also lost $1.2 billion while the other divisions earned $1.9 billion. And Motorola lost its standing as the world's No. 2 handset supplier to Samsung Electronics.
Investor Carl Icahn has been pressuring the company to separate out its mobile phone business, and has been engaged in a protracted legal struggle with the company regarding its future.
Icahn announced earlier this week that he had declined an offer of two seats on Motorola's board and was suing the company to obtain documents related to its mobile devices business and use of corporate aircraft by senior managers, board members, and their families. Aiming for four seats on the Motorola board, Icahn said the documents would help him, and other shareholders, determine what Motorola's board should have done to help the company right its struggling handset business.
It's not yet clear what revisions to his strategy Icahn might make now that Motorola has agreed to the split he requested. His intention to seat four allies on the board, according to a story published Wednesday by the Financial Times, was unofficially approved by the board's current lineup in all cases except one: Keith Meister, chief executive of Icahn Enterprises, who, the board claims, is "unqualified."
Icahn's other nominees to the Motorola board are former Viacom chief Frank Biondi, securities-firm founder William Hambrecht, and MIT engineering professor Lionel Kimerling.
One consequence of the separation: the newly separated unit may now find it easier to partner with another mobile-devices company to help it regain market share and operate more efficiently.
"I suspect it's a prelude for a joint venture for the mobile devices business," Avian Securities analyst Tero Kuittinen told Reuters.
"It might be easier to negotiate with a standalone unit. It's positive news because it shows the company is moving toward a serious restructuring," said Kuittinen, who sees Chinese and Japanese companies as the top candidates for a venture.