On Wednesday, Motorola announced plans to split itself into two independent companies. On Thursday, the industry continued debating whether that is the right move.
The move is part of Motorola's efforts to reposition its mobile-devices and broadband and mobility-solutions businesses. But the split won't happen until 2009.
"We remain committed to improving the performance of our mobile-devices business by delivering compelling products that meet the needs of customers and consumers around the world," Motorola CEO Greg Brown said.
As part of Motorola's effort to deliver market-winning products, Brown added, the company has undertaken a global search for a new chief executive for the mobile-devices business.
"We believe strongly in our brand, our people and our intellectual property, and expect that the mobile-devices business will be well positioned to regain market leadership as a focused, independent company," Brown said.
Focusing on the Digital Home
According to Strategy Analytics, Motorola's decision to break up the company is a step in the right direction. The move will enable Motorola to focus on two of its core competencies -- mobile handsets and the digital home.
Peter King, director of the Strategy Analytics Connected Home service, has long argued that Motorola remains less than the sum of its parts where its consumer strategy is concerned.
"With leading positions in mobile and connected home, Motorola should be driving the market forward with original consumer technology concepts," King said. "But we see little sign that it is maximizing that potential. Separation should help the company direct its efforts more effectively toward broadband and digital opportunities."
Focusing on the Core Competency
Beyond the opportunities for Motorola in the mobile and connected-home areas, Bonny Joy, a wireless analyst at Strategy Analytics, expects the spin-off of the mobile division to enable Motorola to focus on its core competency in cellular handsets -- with one caveat.
"We must emphasize that this short-term financial fix must not distract Motorola from its long-term operational problems," Joy said. "Motorola mobile still badly needs to address its core problems of an ineffective supply chain, a weak 3G component strategy, and an unattractive 3G handset portfolio."
Fitch Ratings has listed Motorola as Rating Watch Negative since Feb. 1. Fitch believes Motorola's announcement will reduce management's focus on improving the business operations and financial performance over the intermediate term.
Help in a Post-Zander Era
Avi Greengart, a wireless analyst at Current Analysis, is also not bullish on the breakup for the short term. From a mobile-devices perspective, he isn't convinced that now is the right time to spin off a struggling division that's undergone significant management changes and needs serious help. The only way it makes sense, he said, is if Brown has examined the product line and decided it can't recover any time soon.
"Even if that's not true, even if Motorola's device division is about to come roaring back, Motorola's competitors will position this as a negative for the company's product line," Greengart said, noting that the decision to hold out until 2009 is an "eternity in the device business."
"You can have a skunk works somewhere that can develop a hit product even amid all this confusion. But that's not what Motorola needs," Greengart said. "Motorola needs an entire portfolio overhaul. That requires management, and that's not what Motorola's had in the post-Zander era."
Ed Zander is Motorola's former president and CEO.