Moto to Spin Off Device Unit … What Now?

After weeks of rumblings around the rumor mill, Motorola Inc. did what many think it should have a while ago: announced it is separating its devices business from its Broadband and Business Mobility division (in English, that’s the infrastructure side of the house). Both will be standalone, publicly traded companies. Investors were huzzah-ing, with Motorola’s stock up more than 5 percent in morning trading.

That’s welcome news for embattled Motorola, which has lost more than 60 percent of that stock price since October 2006. The question however remains: will the restructuring work in the long run? Or even the short run, seeing as the split won’t go into effect until next year?

As for Motorola, no one is commenting. Investors have placed Motorola — which has a $22 billion market cap — on watch lately thanks to some uncertainty on the executive level. The vendor’s second-largest investor, Carl Icahn with a 3 percent stake, has been fiercely critical of Motorola’s failure to increase shareholder returns (to put it in the nicest possible way), and last year engineered the ouster of CEO Ed Zander, who was replaced by Greg Brown. The company’s CTO, Padmasree Warrior, also defected to Cisco Systems Inc. not long after Zander stepped down.

But that has not been the end of the rocky executive road, however; Icahn is now once again engaged in an increasingly dissident proxy battle at the company, bellowing to replace four of Moto’s board members with his own hand-picked directors, ahead of Motorola’s annual meeting on May 5. He also has stepped up legal efforts to force Motorola to open up the files on the devices business and certain executives.

That turmoil at the top hasn’t been the only issue affecting investor confidence in Motorola. It has also been suffering from its linkage with another topsy-turvy corporate entity, Sprint Nextel Corp. . Motorola is a key infrastructure partner for Sprint’s WiMAX network, which has also been the subject of speculation as to when Xohm will roll out, if it can keep partnerships alive to do so and whether Sprint’s continuing profit loss will allow the carrier to finance it in the first place. And a loss of the WiMAX business leaves a big revenue hole in Motorola’s future balance sheet.

As for the soon-to-be-left-out-in-the-cold devices biz, Motorola is already looking for someone to head up that unit, which is No. 3 globally in market share having recently lost the No. 2 spot to Samsung.

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