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Cell phone subscribers in the U.S. are spending more on their wireless handsets, another sign that the smartphone revolution has arrived.

On average cell phone subscribers are spending about $101 on new devices. This is $9 more than they spent on handsets just six months ago, according to a J.D. Power and Associates survey released Thursday. This is the first substantial increase in the average sale price of mobile devices in two years, the consumer survey company said.

What's driving this price jump? Smartphones and other feature-packed phones. Devices, such as Research In Motion's BlackBerry and Apple's iPhone, as well as music-enabled phones are gaining popularity. In fact, J.D. Power reports that smartphones make up about 6.3 percent of all cell phones sold today, compared to the beginning of 2007 when they made up only 1.7 percent of the market. Other market researchers have also noted a surge in smartphone growth. And because these phones typically cost more, they are boosting the overall average sale price. On average smartphones, which allow Internet browsing and a slew of other features, sell for about $208 while regular phones sell on average for about $58.

"As more customers start to upgrade to mobile phones that offer real-time connectivity and access to Internet content--particularly those offered by smartphone devices--we should continue to see the wireless handset price point rise," Kirk Parsons, senior director of wireless services at J.D. Power and Associate.

Another indication that smartphones are impacting the market is the fact that fewer U.S. cell phone subscribers are getting their phones free from carriers. The percentage of customers who say they received a free handset has decreased from 36 percent to 33 percent during the past six months. Carriers typically have offered discounts on some smartphones, but they have not given them away for free.

Cell phone users also reported that they are keeping their phones longer. The average reported length of cell phone ownership is 17.7 months. This is up from 16.6 months in 2006. One main reason driving this trend is that as more consumers invest in more expensive devices like smartphones, they expect to keep them longer. A sagging economy could stretch this length of time even further over the next six months.

The study also revealed that more than 40 percent of respondents said style and design were the most important factors in selecting their phone. Only 25 percent said they chose their current phone because it was offered free. And 21 percent said they bought their phone because it was discounted. Only 17 percent bought a phone because of its variety of features and small size.

Sony Ericsson, which makes the Walkman music phones, ranked the highest in terms of customer satisfaction as part of the survey. LG Electronics came in second. Nokia, the worldwide leader in handset sales, still has much work to do in satisfying customers in the U.S. The company ranked near the bottom in terms of overall satisfaction.

AT&T and Vodafone could be eyeing Huawei's handset division, according to a story published Monday in the South China Morning Post.

The newspaper cited unnamed sources who said that phone companies AT&T and Vodafone had expressed interest in acquiring 50 percent of Huawei's handset division. Private equity firms Blackstone, TPG, and Kohlberg Kravis Roberts are also supposedly interested.

Huawei, based in China, is looking to spin off its mobile phone, laptop, wireless data-card, and home router businesses. Meanwhile, it will keep a 100 percent ownership in its network infrastructure business. The company doesn't publish separate revenue figures on its different businesses, but its handset business is believed to be profitable.

Vodafone already sells Huawei's phones, but AT&T doesn't offer the handsets in the U.S. A move by either mobile operator to become a handset maker is somewhat unusual. Typically, phone companies buy handsets from a wide range of suppliers.

But as handset manufacturers like Nokia, Research In Motion, and Apple build more sophisticated devices and services around their phones, carriers may feel pressure to push back with devices of their own.

As for Huawei, it's clear the company is looking to spread beyond the Chinese and Asian markets. The company had tried to take a stake in U.S. infrastructure provider 3Com. But its attempts were thwarted by U.S. politicians concerned over national security.

Even though a partnership with either service provider could provide broader reach for the handset division, Huawei could risk losing infrastructure business with competing carriers.

Several more companies on Monday agreed to sign their names to the Long Term Evolution (LTE) framework for the next generation of wireless technology.

The largest handset maker in the world, Nokia, was joined by Sony Ericsson, Alcatel-Lucent, NEC, and NextWave Wireless. Part of the agreement on LTE means the companies will agree to license their patents "on fair and reasonable terms," which means keeping royalties for handset patents below 10 percent of the handset sale price.

"Today's announcement is a step towards establishing more predictable and transparent licensing costs in a manner that enables faster adoption of new technologies," Nokia's Ilkka Rahnasto said in a statement.

These five are only the latest to join as the emerging LTE technology gains momentum. In November at the Mobile Asia Congress in Macau, the GSM Association threw its support behind LTE. A few weeks later, Verizon Wireless, the No. 2 wireless operator in the U.S., said it would use LTE for its 4G wireless network. AT&T, the largest mobile operator in the U.S., also has indicated it will use LTE.

News.com's Marguerite Reardon contributed to this report.

You have to hand it to corporate raider Carl Icahn: He sure knows how to stir it up.

Wednesday morning, ailing Motorola announced that it will split into two companies next year. The news doesn't come as a shock to the many who believed something dramatic had to be done to fix Motorola's troubled handset business. And it probably doesn't surprise Icahn, who has been hounding Motorola for nearly a year.

The question that's now bound to be on the mind of people who watch Wall Street like most people watch Sunday football: What does Icahn think about this?

Icahn: Thumbs up or down on Motorola's news?

Last year, Icahn waged a proxy campaign for a seat on the company's board of directors and as of early March, he held a 6.4 percent stake in the Shaumburg, Ill., company. On Monday, he announced he was filing suit in Delaware court to get access to Motorola documents regarding its board of directors, financial performance, and expenses such as executive use of the corporate aircraft.

This year, Icahn is trying to get a four-person slate onto Motorola's board. Motorola CEO Greg Brown said in a conference call Wednesday that the company offered Icahn two seats, but he turned down the offer. Brown also said (I wasn't in the room, so I can't say if it was with a straight face or not) that pressure from Icahn didn't have an impact on the decision to split the company in two.

Suuure. And former Motorola CEO Ed Zander stepped down last year to spend more time with his family.

We contacted Icahn's office in New York City and we'll let you know if or when he does, in fact, have something to say about today's news. But should he like this? Motorola shares were only up about 2.5 percent in midday trading, so it's not like this news is stirring hearts on Wall Street. In fairness, it hasn't been a great day for the financial markets, but you would expect a little more enthusiasm than what we're seeing so far.

Here's one outcome Icahn may like: Motorola gussies up the handset business and sells it, as News.com's Marguerite Reardon discusses in a post aptly titled,"Is Motorola putting lipstick on a pig?" That would get Motorola out of a tough, frequently low-margin, and crowded business. It would also provide the company with the cash to focus on its lower-profile but more successful Broadband & Mobility Solutions business, which does everything from enterprise and government work to cable set-top boxes.

Of course, doing what Icahn wants doesn't always mean investors are amply rewarded. In October, when Icahn was throwing knives at the management of BEA Systems (an enterprise software maker since acquired by Oracle), News.com's Dawn Kawamoto took a hard look at Icahn's impact on companies in which he gains board seats and the companies that turn him away. The results, according to her analysis, were quite mixed.

So the king of the corporate raiders doesn't have all the answers. Unfortunately, up to now, neither has Motorola's management.

Update: Now we know what Icahn thinks. In a letter to Motorola's board of directors released after trading ended Wednesday, Icahn called the Motorola split long overdue, but questioned the company's timetable. He also said he plans to continue with his proxy fight.

Motorola said Wednesday it plans to split off its handset business, but the move might just be a last attempt to pretty up the failing business unit to make it more attractive to potential buyers.

Since Motorola said in January that it was considering "options" for its handset business, there's been speculation that the company was preparing to sell it to a third party.

But word on the Street is that the company couldn't find a buyer. After all, Motorola is trying to unload the business for a reason. The company currently has no hit products, and its market share has been declining rapidly. Besides, potential buyers may look at what happened to BenQ when it bought Siemens' handset business in 2005. A year later, BenQ Mobile, which had been set up to handle the brand business, went bankrupt and with it went the rest of Siemens' handset division.

So what's the best way to move merchandise when it isn't selling? You could lower the price. Or you could pretty up and repackage what you've got. That might be just what Motorola is trying to do. It reminds me of those HGTV shows that tell you what you need to do to sell your house. The first thing they tell people is to remove all the excess crap they have lying around the house, pictures, kids' toys, anything that could distract a potential buyer.

So by separating the handset business from the rest of the company, Motorola may be trying to get potential buyers to focus exclusively on the good things the handset business has to offer without being distracted by the clutter of the other Motorola business units.

In essence, Motorola today is simply a brand. It's unclear what will happen to that brand after the company is divided into separate entities next year. General consensus among experts is that the Motorola brand will have to go with the handset business. And if it does, that may make the business a little bit more attractive to companies that don't have the same cache.

Chinese manufacturers, such as Inventec, Amoi Electronics, Huawei Technologies, and ZTE could benefit from the use of Motorola's brand name. These companies sell a lot of handsets in China, but they are not well known outside their country. Still, they are trying to address the developing markets, and having the Motorola products and brand could help them. Think about how Lenovo used the ThinkPad name after it bought the unit from IBM.

A marketing representative from ZTE told Reuters in February at a conference in Barcelona that the two companies have been talking.

So maybe splitting the company is really Motorola's way of prettying up the pig for a sale.

Motorola is hoping two is better than one.

On Wednesday, the company, whose cell phone business has been in a death spiral for several quarters, announced that after a two-month formal analysis, it has decided to split the company into two publicly traded entities.

One will handle handsets and accessories while the other will continue to concentrate on wireless broadband and enterprise communication products.

"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," CEO Greg Brown said in a release.

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 service 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.

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. Motorola offered up two board seats to Icahn this week, but the activist investor rejected the offer. Brown declined to comment on how this latest news will impact discussions with Icahn's camp.

In some respects it looks as if Motorola is giving Icahn some of what he originally wanted. The company is splitting off the handset business to increase shareholder value. Details of the transaction, which, if it's accepted by shareholders, would be complete in 2009, were not discussed during a conference call the company held Wednesday morning with investors and analysts.

Pressure from all quarters
Many experts agree that something had to be done. The company's iconic cell phone division, which typically makes up more than half its revenue, hasn't had a hit since the highly popular Razr. As a result, it's seen its global market share plunge from more than 20 percent a year ago to just 12 percent today. And it's fallen from second place in the cell phone market to third place, behind Nokia and Samsung Electronics.

To make matters worse, it doesn't look like things are going to turn around anytime soon. During the company's fourth-quarter conference call in January, Brown told investors that it would take longer than expected to turn around the troubled cell phone business. The company warned that revenue and market share would likely decline further in the first quarter. A week later, the company announced it was considering spinning off the division.

Over the last two months, Brown has emphasized the company's commitment to its mobile business. Now the company is moving forward with a plan of action. Wall Street reacted positively Wednesday morning, boosting the company's shares almost 3.5 percent, to $10.09 per share, over Tuesday's close of $9.76 per share.

Uncertainties about the likely result--and preserving the brand
But many questions linger. For one, how will spinning off the business unit actually help the company get back on track? And then there is the question of brand. Motorola has an 80-year history as a communications provider. The company practically invented the cell phone industry in the 1980s. So what will it do with a brand it has spent billions of dollars and decades creating?

Brown gave vague answers to these questions during the conference call. He reasoned that splitting Motorola into two separate companies will allow management teams to focus and tailor their financials to the needs of those businesses.

Ellen Daley, an analyst with Forrester Research, agrees that splitting the company could be helpful in this regard.

"Separating (the handset business) into a dedicated unit allows (Motorola) the runway to fix some of its issues in supply chain, innovation," she said in an e-mail. "It is a fundamentally different business than the other half of their growing business, i.e. enterprise mobility, connected home and networks business."

It will also likely allow these other businesses more room to grow on their own, she said.

But even though it's easy to see how Motorola's other businesses might benefit from the separation, it's still a bit unclear what will really be different in the handset division. The company's problem is that it isn't making products people want to buy.

The hope is that a separate company might be more nimble. And that, along with better design ideas, better cost structure, and better execution, is what the company really needs. Motorola still seems to be at least one or two design cycles behind its competitors in terms of cool new phones. While its rival Nokia made several handset and service announcements at the GSMA Mobile World Congress in Barcelona last month, highlighting new features like navigation, Motorola had nothing interesting to show at the conference besides a few refurbished handset designs and a rehashed announcement from the Consumer Electronics Show.

Brown acknowledged that new products are key to turning around the handset business. But he said the division needs to be separated to help attract new, top-level talent to lead the recovery. Brown is currently searching for a new CEO to head up the new company.

"We understand that this will be a product-led recovery. And we are taking steps now to ensure and solidify the recovery," he said. "But I think (this announcement) enables the opportunity for us to pick a world-class CEO."

So what about Motorola's brand? Without its brand, many experts say, Motorola's handset division is nothing, simply a collection of has-been and me-too products. Brown recognized the importance of brand and said the company is taking careful steps to figure out what to do next.

"The Motorola brand is strong and trusted and proven," he said. "It's valuable to mobile devices as well as other assets in parts of the business. We will refine the brand strategy in next several months going forward."

But Forrester's Daley believes that keeping the brand with the handset division really is the only viable option the company has.

"Good or bad--Motorola's brand is for mobile devices," she said. "The broadband and mobility solutions unit will have to grow and separate their brand/value from the consumer-device company."

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.

In filings with U.S. regulators, Nokia on Thursday estimated that the growth rate for sales of its handsets in Europe had shrunk to 3 percent in 2007 from 16 percent in 2006.

What's more, the company said its growth rates had cooled in the Middle East and Africa (to 19 percent from 68 percent in 2006), North America (to 6 percent from 13 percent), and Latin America (to 10 percent from 15 percent), Reuters notes.

The global picture wasn't quite as wearying for Nokia: 2007 sales in the Asia-Pacific region grew by 34 percent, and in China, sales grew by 34 percent, offsetting the drops elsewhere. Nokia said emerging markets generated almost 60 percent of handset-industry sales volume last year, and 55 percent in 2006.

In light of sales-growth predictions released by Gartner in February and Sony Ericsson's announcement on Wednesday that slowing demand in Europe for its midpriced and high-end phones would ding its first-quarter results, the estimates from Nokia don't seem terribly surprising. Gartner predicted that handset sales growth in 2008 would slow to 10 percent worldwide, with market saturation in North America and Western Europe doing the most to slow sales momentum.

From here on out, global-growth forecasts for 2008 aren't likely to be even that optimistic.

Cell phone maker Sony Ericsson said on Wednesday that demand is slowing in Europe for midpriced and high-end handsets, and that slowing demand will hit the company's first-quarter results, notes a story by Barron's Tech Trader Daily.

Sony Ericsson also said component shortages for midpriced phones had hurt sales, which the company expects will reach 22 million phones for the quarter, with an average price of $187. At least one analyst, who previously had predicted 9 percent over the year-ago quarter, told Tech Trader that that number is well below expectations. He had forecast sales of 26.5 million handsets--almost 17 percent more than the figure presented by Sony Ericsson--and now says sales likely will be 10 percent below those of the year-ago quarter.

Considering the current economic climate, though, Sony Ericsson's warning does at least parallel data released in February by Gartner, which predicted that handset sales growth in 2008 would slow to 10 percent worldwide, with market saturation in North America and Western Europe doing the most to slow sales momentum.