Motorola may hang up on Razr business
An end of an era could come soon for Motorola Inc. if it sells its legendary mobile phone business.
The Schaumburg company said Thursday it is considering strategic moves to boost the floundering business, including its sale.
Wall Street analysts have speculated for more than a year about a break-up, consideration of which may have been accelerated last year when billionaire investor Carl Icahn advocated the sale and the ousting of then CEO Ed Zander.
"I am pleased to see that Motorola is finally exploring that proposal," Icahn said in a statement through his assistant. "However, we have previously informed Motorola that we expect to run a slate of directors for the upcoming annual meeting and this announcement by Motorola will not deter us from that effort -- we believe Motorola is finally moving in the right direction but certainly still has a long way to go."
In the fourth quarter, mobile handset sales were down more than 33 percent compared to a year ago, said David Weissman, senior telecom analyst with Zacks Investment Research in Chicago.
"We believe that Motorola is now exploring opportunities in higher margin business and may need to possibly divest or restructure its handset business as part of overall initiatives to recreate improved shareholder value," Weissman said.
Don McLellan, Motorola senior vice president of corporate strategy, declined during an interview Thursday night to discuss specifics of a potential sale or spin-off, saying it's premature.
"This timing is important because we're proud of our mobile devices franchise and believe strongly that it's a big player in this space," said McLellan. "But the stock price is extremely undervalued and this is unacceptable to us."
McLellan said they need to get the stock "back to a leadership category first."
He declined to provide a timeline for the stock or for any sale of the mobile phone business. "I will say this, what we will do will be expeditious and it's urgent."
Wall Street knew something was about to happen when Motorola informed the New York Stock Exchange Thursday afternoon it would release important news. "Based on such news pending, we halted trading, which is a standard procedure, whether it's during market or after market trading," said NYSE spokesman Richard Adamonis.
Motorola after-hours trading stopped at 3:27 p.m. when shares were at $11.40, down 10 cents. A half-hour later, Motorola issued its statement and shares soared up 12 percent.
"The shareholders could have gotten hot under the collars, or maybe Motorola is close to a deal," said Jane Zweig, CEO of Columbia, Md.-based The Shosteck Group, which tracks the wireless industry.
Earlier this week, an analyst with London-based Nomura International issued a report saying the sale of Motorola's Mobile Devices business was likely and that Chinese companies had been looking at it.
A lot of questions were without answers Thursday. How much money is needed to re-build the business? What happens to the brand name and what happens to the millions of consumers who now own Motorola phones? These are still unknowns, said Mark McKechnie, analyst with San Francisco-based American Technology Research.
"It's good that Motorola finally came out with this, but they'll need to act quickly now," said McKechnie. "How will carriers deal with phone sales now? If this drags on too long, they could lose more sales."
Motorola's legacy
From the brick-sized DynaTac to today's ultra-thin Razr, Motorola has been long known for its mobile phone innovations over the decades. But an era may be ending soon as Motorola mulls the sale of its wireless phone business. Here's a look at its wireless achievements:
• 1930s: Motorola began developing two-way radio communications equipment.
• 1960s: The company became a major supplier of pre-cellular car telephones.
• 1973: Motorola produced the first wireless phone called the DynaTAC (or DYNamic Adaptive Total Area Coverage) portable phone prototype.
• 1983: FCC approved the DynaTAC 8000X phone, the world's first commercial portable cell phone.
• 1996: The StarTac wearable phone, weighing 3.1 ounces, is introduced.
• 2004: The MotoRazr ultra slim, metal-clad, quad-band flip phone is introduced.
• 2006: The Motorola Ming smart phone is introduced in Asia with advanced handwriting software to recognize more than 10,000 handwritten Chinese characters. The MotoQ smart phone handset is later sold to consumers.
Source: Motorola Inc.