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| Virginia Lee |
• Current Perspective:
Slightly positive on the split of Motorola into two independent companies – one focused on devices, the other on network infrastructure. The move has the potential to further invigorate the more profitable networking and enterprise units, possibly even setting the stage for a scale improving merger. At the same time, though, a long lead time – and the potential for the deal to not even materialize at all – will cause a dangerous distraction that could severely impact an otherwise solid (and improving) network infrastructure business.
• Vendor Importance: High to Motorola because the company is under pressure to shore up its ailing Mobile Devices business without damaging growth in its other businesses. A move to separate the two businesses is a necessary step in either rebuilding each organization while attempting to entice potential merger/acquisition partners. To be sure, weakness in Motorola’s networks business did not necessitate the move; yet until the network’s unit is freed from an underperforming device business, there is no way the company would extract maximum value from it.
• Market Impact: Moderate on the wireless infrastructure market. In the near-term, Motorola will operate as usual since the intended action may (or may not) happen until 2009. As such, the vendor will be mired in distractions and speculation until the separation or some other event takes place. To that end, however, competitors will be quick to seize any opportunity to position Motorola as weak and capture any infrastructure or device share they can from the company. |
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| Avi Greengart |
• Current Perspective:
Negative on Motorola’s upcoming split, because the only reason to split handsets off from the rest of the company is if new CEO Greg Brown has no faith that the division can right itself anytime soon. Under different circumstances, spinning off the handset division from other businesses could be a positive strategic move – Motorola has benefitted from synergies between its handsets and infrastructure (e.g., in iDEN and WiMAX), but has little integration with the Enterprise group and none with the IPTV and STB business units. But with the troubles in the handset division, another distraction is the last thing Motorola needs.
• Vendor Importance: Very high to Motorola, because this is structurally altering the company and replacing management – again – while the company’s handset sales continue to decline worldwide. However, it also temporarily quiets Carl Icahn, who was becoming a major distraction for senior management.
• Market Impact: Moderate on consumer handsets and smartphones, because aside from the distractions inherent in the split, Motorola’s handset fortunes should be relatively unchanged. Motorola had more latent than actual synergies with its enterprise group, and nearly all telecom vendors have already split off infrastructure from handsets over the past decade. However, “unchanged” is not a positive assessment for Motorola’s handset company: the challenge is to run a company that still sells tens of millions of phones a year in geographies around the world, while fixing the company’s problems, holding off Wall Streeters who want a quick fix, and designing consumer products that can compete with the best from Nokia, Samsung and Apple. |
