Motorola Plans January Spinoff of Mobile-Phone Unit
Motorola Inc., the U.S. maker of mobile phones and two-way radios, is targeting January for the spinoff of its handset unit, splitting the company in two.
Co-Chief Executive Officer Greg Brown gave the timeframe at a meeting with analysts in New York today. He had previously only said the split would occur in the first quarter.
Motorola reported a sales increase last quarter for the first time in almost four years, smoothing the way for a spinoff of its handset and set-top-box businesses as a new company. That will leave Brown to focus on running an entity called Motorola Solutions made up of the company’s remaining businesses, which make bar-code scanners, walkie-talkies and other emergency- communication equipment.
Motorola, based in Schaumburg, Illinois, fell 5 cents to $7.94 at 4 p.m. on the New York Stock Exchange. The shares have added 2.3 percent this year.
Co-CEO Sanjay Jha runs the phone and set-top-box businesses, which will be known as Motorola Mobility once spun off. After the separation, Motorola Solutions will be able to put money it had been investing in the phone unit into the rest of the business and may make acquisitions, Brown said in an interview last month. He reiterated today that the company will consider buying companies after the split.
“Right now we’re focused on launching, listing and growing organically,” Brown told analysts today. “Then we’ll see how things come at us in 2011.”
Motorola Solutions expects sales to climb 5 percent to 8 percent excluding acquisitions over the long-term, Brown said today. Its operating margin, or profit as a percentage of sales, should be 16 percent to 18 percent, helping the new company to a ‘solid’ investment-grade rating, he said. Motorola will consider returning cash to shareholders, including through dividends, Brown said.
The company aims to save $150 million to $250 million in operating costs through job cuts Brown described as ‘modest.’ Asked to elaborate, he said they would only be in the ‘hundreds ’and wouldn’t affect its research and development or sales force.
The radio and bar-code-scanner business reported a 9 percent increase in sales last quarter to $1.9 billion and a 5.9 percent gain in operating profit to $321 million. That helped lift the company’s sales by about 6 percent to $5.8 billion, the first year-over-year revenue increase since the fourth quarter of 2006.
Government customers account for 65 percent of sales so far this year, with corporate customers generating 35 percent, Chief Financial Officer Edward Fitzpatrick told analysts. The company will break out revenue by those two segments once independent.
The company should have about $2.9 billion in debt and $5.3 billion in cash at the time of the split and maintain a credit facility of $1.5 billion, Fitzpatrick said.
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