Shares in Motorola (MOT) rose sharply after the company confirmed late Thursday that it would split itself into two independent businesses by the first quarter of next year. The stock gained as much as 9.6% to $7.29 at one point early in Friday's session.Motorola will combine its mobile handset unit with its set-top cable-box division and spin off the new publicly traded company to shareholders through a tax-free stock distribution. Sanjay Jha, currently Motorola's co-chief executive, will head up the spun off operation. The remaining wireless networking and enterprise radio businesses will be led by Greg Brown, Motorola's other co-chief executive.
Long Time on the Burner
"We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success, and enhances long-term shareholder value," said Chairman David Dorman in a statement.
Motorola has been considering some kind of breakup for years but had to put off such plans amid falling sales and market share.
"The combination of mobile devices and our home business brings together two highly complementary and innovative organizations," said Jha in a statement. "Together, we will be best positioned to lead in the convergence of mobility, media and the Internet." The mobile handset and set-top box company helmed by Jha will own the Motorola brand and license it for free to the networking and radio and company.
"The separation plan is positive news as it reflects management's confidence to turn-around its mobile device business and strive to return to profitability in the [fourth quarter of 2010]," wrote Gabelli & Co. analyst Hendi Susanto, who rates share a buy.
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