For connoisseurs of American electronics, Jan. 31 marks what may become the end of a technology icon. Motorola, the largest and most successful cell-phone manufacturer in the U.S., announced it’s considering separating the cell-phone division from the rest of its businesses, possibly through a sale.
The company had to say there’s no assurance a transaction will occur, but the statement from recently appointed Chief Executive Greg Brown reads like a fait accompli. “We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise,” Brown said.
The fact is, Motorola management has been unable to speed up the recovery under its current structure. It’s just not clear whether Motorola would sell the cell-phone unit or spin it off to shareholders. The company said it won’t discuss the options under consideration until the board of directors picks one.
Failed Profitability Attempts
What is clear is that Motorola — under immense pressure to fix its ailing mobile devices business, which tumbled last year from No. 2 in the world behind Nokia, to No. 3 behind Samsung Electronics — failed to produce a best-selling phone that could match the allure of the Razr, which debuted in 2004. Revenue has dwindled and losses mounted, causing shares to lose 42 percent of their value over the past year.
Wall Street battered the shares again last week, when Brown acknowledged in an earnings conference call that a recovery in the cell-phone business isn’t likely until next year at the earliest.
In a desperate attempt to cut costs and return to profitability, Motorola has axed thousands of engineers and managers. Now, “they are acknowledging this is a pickle they’re in,” says Mark McKechnie, an analyst with American Technology Research. “They have the core technology,…