Motorola Splits into Two

2011 marks a huge change in the history of Motorola. Last Tuesday, the 82-year-old American-based, multinational, telecommunications company based in Schaumburg, Illinois announced its split into two companies – Mobility and Solutions.

The ever changing market demands has brought in the decision for the split. For decades, Motorola Inc.’s products focused on private consumer merchandise: car radios in the 1930s, TVs in the 1940s and cell phones starting the 1980s. But as the company expanded so has its line of products. Motorola, subsequently, has also built police radios and barcode scanners aimed at government agencies and large businesses. Consquently, investors had a hard time drawing “the already thinning” line between the two markets. Hence, Motorola decided to make up the second company, Motorola Solutions Inc.

CEO of the consumer-focused Motorola Mobility Holdings Inc., Sanjay Jha, said in an interview that the separation will be a huge advantage for both (new and old) company as each will have its own focus. “I think you’ll see a board that is much more focused on understanding technology as opposed to managing a portfolio of products,” Jha said.

“Motorola (Mobility) can be focused on handsets and nothing but handsets in a world where so much as changed over the last five years is good thing. Likewise, Solutions doesn’t have to worry about the once-flailing cell phone business.” ” said Gartner analyst Michael Gartenberg who thinks the breakup will help facilitate management and decision making. “Hopefully this will lead to more innovative designs, better time to markets and a better ability to not just capitalize on trends but also create trends,” he said.

Meanwhile, Mobility’s president, Dan Maloney is brimming with optimism.”Inside Motorola, it was difficultat times for employees to understand how what they were doing was going to directly have an impact on financial performance because it was such a large, multi-faceted entity,” he said.

Motorola Solutions spokeswoman Tama McWhinney shares the same positivism. “The separation gives us increased strategic flexibility and the opportunity to focus on this part of the portfolio with clarity, purpose and management focus,” she said in a statement.

As part of the breakup, Motorola is selling its cellular network equipment division to Nokia Siemens Networks, a Finnish-German joint venture. Motorola’s cell phone division once enjoyed strong sales when the company launched the “Razr”, a 2004 feature phone that became a best-seller. Cell phone sales once accounted two-thirds of the company’s revenue, but that had become a thing of the pass as the company has not produce a star smartphone since.

The pressure to split the company actually began back in 2008, under pressure from activist investor Carl Icahn. The company then hire Jha, then the chief operating officer of mobile chipmaker Qualcomm Inc., to strengthen the declining phone business.