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Motorola's great divide
Under pressure from activist investor Carl Icahn, the company separates its mobile handset business
Bearking up is hard to do. Splitting up might be a little easier, especially if your company is facing intense pressure from a billionaire shareholder activist. That's the story this morning at Motorola, the giant cellphone manufacturer. The company is saying this morning that it'll separate its struggling handset unit from its other operations. The move might be a response to pressure from activist investor, Carl Icahn.
Icanhn owns nearly 6.5% of Motorola, and has been pressuring the company for quite sometime to split off that business. He's also sued Motorola this week in an attempt to investigate the company's strategy for improving its business, especially its handset business. Now sales of Motorola phones fell 38% in the fourth quarter of 2007, while nearly all of Motorola's competitors saw gains during that period.
Icanhn has been seeking four seats on Motorola's board and as of Tuesday the company offered Icanhn's investment firm two board seats, which Icanhn flatly rejected. Since Icanhn began agitating for a change at Motorola, several executives have stepped down from the company, including former CEO Ed. Zander, shares of Motorola are down 45% in the past year.
As for how the split will work, well, one business will focus exclusively on cellphone handsets, including Motorola's popular RAZR model, that business has been struggling due to market saturation, and competition from other players, including Apple with its Iphone ,also Nokia and Research Emotion with the Blackberry. The other business will focus on the fastest growing parts of Motorola's business, including network equipment, cable TV set top boxes, and also two-way radios.
We'll keep an eye on shares of Motorola for you throughout the day. You can get more information right here on our site, CNNmoney.com
Notes:
Split up:to splinter into separate parts
