There you go. Yet another, once-mighty, company is being split up. Motorola, once a dominant name in telecom and assorted technology-related businesses, is being split into two. Its telecom equipment and mobile handset units will become separate listed entities in what appears top be a desperate struggle for survival. The split may also be an attempt to blunt the efforts of billionaire investor Carl Icahn to gain Motorola board seats. (See: Motorola to split into two companies – mobile devices, and broadband and mobility solutions)
No business can survive for ever on just one product, even if it is backed by a storied brand like Motorola. The company’s mobile handset business was a one-hit wonder. The fantastic, when launched, Moto Razr was a big success and the company became the second largest player in the market, dominated by Nokia. The Razr sold over 100 million units before competition caught up and it started looking jaded.
Motorola couldn’t come up with a worthy successor to the Razr in time. It tried to enter music phones, a segment dominated by Nokia and Sony Ericsson, with limited success. Another big bet was sub-$20 phones targeted at the emerging markets that were adding millions of new subscribers every month. That didn’t work as customers in cost-conscious markets demanded better features and Asian manufacturers invaded that market. That segment was never going to make any money anyway.
The split may help the telecom equipment business to attract better valuations. But, the future of the handset business is highly uncertain. Unless it can come up with a couple of hits like the Razr, it will most likely be acquired by another manufacturer.
This is not the first time Motorola is spinning off struggling businesses. Financial pressures following the failure of the ambitious Iridium satellite network project forced the company to hive off ON Semiconductor. Motorola sold its defence business to General Dynamics a few years later. In 2003, its remaining semiconductor business was separated into Freescale Semiconductor. The company may be hoping to emulate the success of Freescale, which saw a dramatic revival after separation.