Competition could cost Motorola dear
Motorola Inc, the biggest US mobile-phone maker, may find its money-losing handset unit is worth as little as $3.8 billion, a tenth of its value in 2006, now that Garmin Ltd and Hewlett-Packard Co are entering the market.
Motorola, based in Schaumburg, Illinois, plans to separate the wireless unit from its networking equipment, cable-TV set top box and two-way radio businesses, succumbing to pressure from investor Carl Icahn, who began calling for the division's disposal last year. Both companies will be public.
Garmin, the second-largest maker of car-navigation devices, plans to sell "hundreds of thousands" of touch-screen GPS phones this holiday season. Hewlett-Packard, the top personal-computer manufacturer, will offer handsets with word-processing. The competition may prevent Motorola from halting a 46 percent slide in the stock since Sept 30.
"The company is increasingly losing its relevance in the handset market," said Ashok Kumar, a technology analyst with CRT Capital in San Francisco. He doesn't have a rating on the shares.
The feature-packed products may further fragment a $147 billion mobile-phone market already cracked by Apple Inc's iPhone and Research In Motion Ltd.'s BlackBerry.
Garmin, based in George Town, Grand Cayman, and Hewlett-Packard, of Palo Alto, California, are targeting buyers willing to pay as much as $600, leaving Motorola behind with cheaper, less-profitable handsets. That could spoil Chief Executive Officer Greg Brown's plan to fix a unit that lost $1.2 billion last year as competitors grabbed sales.
The decision to split Motorola, announced on Wednesday, buys time for Brown to recruit a CEO for the handset unit, whose sales plunged by one-third last year to $19 billion, and return it to a profit. The business is worth $1.69 a share based on 2009 estimates, Merrill Lynch analyst Tal Liani said in a research note.
Liani's figure equates to about $3.8 billion. Estimates from other analysts range to $5 a share or $11.3 billion, and higher for the unit.
Agencies
(China Daily 03/28/2008 page16)
