Motorola Announces Split From Handset Division

Motorola has officially confirmed that it will split into two companies in an effort to compete more effectively in today’s fiercely competitive mobile market.

Motorola said that on 4 January 2011, it will spin off its handset operation, creating two entities – one focused on handsets and Internet (Motorola Mobility Holdings), and the other on professional equipment (Motorola Solutions).

The idea is that the handset division (Motorola Mobility) will focus on the media, mobility, Internet and computing markets, whereas Motorola Solutions will target communications solutions to government, public safety and enterprise customers.

One Becomes Two

Motorola shareholders will receive one share of Motorola Mobility for every eight shares of current Motorola shares they hold, Motorola said in a statement.

“Today’s announcement marks another important milestone toward the upcoming separation that is expected to benefit Motorola, its stockholders, as well as each company’s respective customers and employees,” said CEOs Greg Brown and Sanjay Jha in a joint statement. “We look forward to taking advantage of the opportunities before us as we begin the new year as two independent, publicly traded companies.”

Greg Brown will become the CEO of Motorola Solutions and Sanjay Jha will be CEO of Motorola Mobility.

The decision to split Motorola into two entities has been a long time coming as the former telecom giant battled to shore up its market share in the face of increasingly stiff competition, especially in the mobile space.

Razr Millstone?

Many believe that Motorola’s failure in the handset market, where it was once the number two handset maker behind Nokia (currently it is ranked fourth), can be blamed on the massive success the company enjoyed with its clamshell Razr phone.

Motorola tried but was unable to replicate that success with successor devices, which failed to capture the public’s imagination as the original Razr had done.

In an effort to stem its losses in the handset arena Motorola cut thousands of jobs. On 14 January 2009 it made another 4,000 employees – 3,000 in the handset division – redundant.

Motorola also bet heavily by publicly hitching its bandwagon to the Android platform.

The arrival of its Droid handset was generally well received, but it failed to make a significant impact against the likes of the iPhone and BlackBerry.

However despite the best efforts by Motorola’s management and its designers, it was unable to staunch the bleeding, hence the decision to spin off the handset operation.