Motorola Plans Reverse Stock Split – Analyst Blog

As part of the spin-off of its mobile-phone business, Motorola Inc. (MOT) has planned a reverse stock split to help increase the share price.

 

In this regard, the company will hold a special stockholder meeting on November 29, 2010 to seek approval for the move.

 

The proposed stock split ratio ranges from 1 for every 3 up to 1 for every 7 shares, with exact ratio to be determined by the Motorola board. If approved, the split would be implemented in first quarter 2011, immediately after the spin-off.

 

The company is proposing the reverse split as part of its plan to separate itself into two companies, Motorola Mobility and Motorola Solutions.

 

Motorola believes the reverse split will help improve the marketability and liquidity of the shares of Motorola Solutions, which will house Motorola’s enterprise mobility and legacy businesses. Motorola sold off its wireless networks business to Nokia Siemens Networks, a 50-50 joint venture between Nokia Corp. (NOK) and Siemens AG (SI), in July for $1.2 billion. New shares will be issued for Motorola Mobility, which will include the company’s handset unit and its set-top box division

 

However, the move would result in a corresponding decrease in the number of authorized shares of Motorola common stock.

 

In August 2010, Motorola said in a regulatory filing that it will give $3.5 billion to Motorola Mobility to make it debt free. The cash will be used to operate and expand the businesses and will also facilitate acquisitions.

 

Motorola continues to face stiff competition from Cisco Systems Inc. (CSCO), Nokia Corp. and Samsung Group.

 

We maintain our long-term Neutral recommendation on Motorola. It is currently a short-term Zacks #3 Rank (Hold) stock.