Motorola split dials up simpler message

Market changes, investors drive Motorola’s breakup

By PETER SVENSSON

AP Technology Writer

NEW YORK — For decades, Motorola Inc.’s products told the story of the march of electronics into the hands of consumers: car radios in the 1930s, TVs in the 1940s and cell phones starting the 1980s.

Now, the iconic company is breaking up, the victim of changing markets and the need to present simpler stories to investors.

Motorola’s cell phone business, which as late as 2007 was riding high on the success of the Razr, is struggling to reshape itself. And its survival may ride on whether it succeeds in turning a once-mass-market cell phone business into a much smaller mold, focused on playing in the same niche as Apple Inc.’s popular iPhone.

Two businesses

Early next year, Motorola is slated to separate the business that makes cell phones and set-top boxes from the one that makes police radios and bar-code scanners, Enterprise Mobility.

In a prelude to that split, Motorola announced Monday that it is selling the bulk of its wireless networks division for $1.2 billion to Nokia Siemens Networks, freeing Enterprise Mobility from a Networks business that has been holding it back in the eyes of investors.

Enterprise Mobility is the part of Motorola that’s currently doing the best — what Morgan Keegan analyst Tavis McCourt calls the company’s “crown jewel.”

Its customers are police departments, government agencies and big retailers, putting it outside the view of consumers.

Its roots also stretch back further than any other Motorola business: the company, then called Galvin Manufacturing, sold its first two-way police radio system in 1940 to the police department in Bowling Green, Ky.

By contrast, Networks, which is a supplier to wireless carriers, has an aging product portfolio and is too small to compete in today’s global market.

Wireless carriers have been consolidating into larger companies and now prefer to deal with only a couple of equipment vendors each, narrowing the scope for small suppliers such as Motorola.

Diminishing point

The point of one company making both cell phones and the equipment that connects their calls has diminished as well.

The industry was pioneered by Motorola, LM Ericsson AB and other companies that made both phones and network equipment. But with increasing standardization of the technology, there is no longer much synergy; any phone will connect to a compatible network.

So Ericsson spun its handset business into a joint venture with Sony Corp., and Nokia Corp. of Finland combined its networks business with Siemens AG of Germany to form a joint venture that focuses on handsets.

In the hunt for scale, the other big U.S. supplier of network equipment, Lucent, was bought by the French company Alcatel in 2006. Canada’s Nortel Networks filed for bankruptcy in 2009, shortly after it was said to have discussed joining its networks business to Motorola’s. Ericsson and Nokia Siemens networks ended up buying parts of Nortel.