Motorola to split after sales slide

Motorola Inc plans to split into two companies next year amid pressure from billionaire investor Carl Icahn to break off the money-losing mobile-phone business, exiting a market it created 25 years ago.

One company will focus on handsets and the other will sell network equipment, cable TV set-top boxes and two-way radios - businesses that are profitable and growing faster. The board is looking for a new leader for the phone business, Motorola said in a statement yesterday.

Motorola sales slid for four straight quarters as consumers snapped up phones from Apple Inc and Nokia Oyj, prompting Icahn to demand that the company offload the division. Motorola lost market share to all of its major rivals last year after failing to come up with a successor to its Razr, which created the category of slim phones when it was introduced in 2004.

"The Razr was so successful as a unique product that it masked a lot of the underlying problems," Michael Walkley, an analyst at Piper Jaffray & Co in Minneapolis, said before the announcement.

Motorola rose 64 cents, or 6.6 percent, to $10.40 at 7:40 am before the opening of New York Stock Exchange composite trading. The stock had declined 45 percent in the past year before yesterday.

The Razr, which initially sold for $500, has since lost its cachet. In some cases it's available for free with a contract.

Apple introduced its Web-browsing iPhone, which combines a touch-screen mobile phone with an iPod, in June. The company sold 2.3 million of the devices in the holiday quarter. Motorola's Razr sequel sold 1.5 million units in that period, missing some analysts' estimates.

While all main rivals boosted sales in the fourth quarter, Motorola's phone shipments plunged 38 percent. Chief Executive Officer Greg Brown, who took over from Ed Zander at the start of this year, said a week after the company's fourth-quarter earnings report that Motorola is considering splitting off the handset unit.

Motorola started selling the world's first commercial mobile phone, the DynaTac, in 1984, after gaining regulatory approval for the device the year earlier. It created the first prototype for the product in 1973.

In 1996, Motorola introduced the $1,000 StarTac, among the first handsets to flip fully open. After its appeal faded, the company lost its No 1 position in 1998 to Nokia, whose candy-bar-shaped phones won over customers in Europe and Asia.

To revive sales, Motorola brought in Zander in 2004. He replaced Christopher Galvin, the grandson of Motorola's founder, ending the family's 75-year dynasty. Zander introduced the Razr, one of the thinnest phone on the market, later that year.

The device, which sold more than 110 million units, helped Motorola cement its position as the second-largest handset maker and fend off Asian competition until last year. Samsung Electronics Co took over the No 2 spot from Motorola in the second quarter with its sleek Sync and BlackJack devices. Sony Ericsson Mobile Communications Ltd may steal the No 3 position this year, demoting Motorola to fourth, analysts say.

Agencies

(China Daily 03/27/2008 page17)