Motorola Renames Spin-Off Companies - Analyst Blog

Motorola Inc. (MOT) moved a step ahead regarding its previously announced spin-off of its Mobile Devices and Home businesses by renaming the newly formed separate entities.

The Mobile Devices and Home Division will be renamed as Motorola Mobility and the Enterprise Mobility Solutions and Networks businesses will be known as Motorola Solutions.

Motorola created a new unit called Motorola SpinCo, a holding company for Motorola Mobility, which filed the Form 10 Registration Statement with the SEC. The deal will likely be wrapped up by the end of the first quarter of fiscal 2011.

The spin-off has been in progress since early 2008. Motorola has incurred losses of about $5 billion over the past three years, due to the weakening sales. As of April 3, 2010, Motorola had $8.48 billion in cash and investments. Total debt at the end of the first quarter 2010 summed up to $3.9 billion.

The company’s struggling cellphone unit is yet to recover from the competitive threat of smartphone maker Apple Inc. (AAPL) and Research In Motion Ltd. (RIMM). Also, its set-top box business writhed due to a weak economy. Besides, its wireless network equipment business was hit hard due to the consolidation among telecom operators.

Nevertheless, Motorola has started showing initial signs of revival. In addition to its newly launched Android-based 3G smartphones, the company is continuously upgrading its portfolio of innovative products for broadband communications infrastructure, enterprise mobility and public safety solutions.

In order to regain its market share, Motorola has been trying to slash expenses and develop new smartphones, such as the Droid (which recently gained immense popularity and drove Motorola’s market share) to ensure profitability of the division by the end of the year. Motorola smartphones are based on Google Inc.’s (GOOG) Android operating system. Recently, Verizon Communications Inc. (VZ) also launched the next flagship Motorola phone, the Droid X.

Demand for Motorola’s Droid phone shot up considerably, attributable to its unique design, updated multimedia features, exciting new widgets and a security upgrade. Droid and the newly launched Droid X both deliver a satisfactory consumer experience with warp-speed Web browsing, a spacious screen and Motorola’s expertise in design and voice quality.

The market for broadband network and enterprise solutions will remain strong in the long run. We believe effective cost control measures, extensive demand for wireless broadband services and newly introduced high-end 3G smart-phones will support the stock price in the near term. However, we do not foresee any above market gain for the stock in the near future, and thus maintain our long-term Neutral recommendation on Motorola. The short term Zack’s Rank is #3 (Hold).