UPDATE 4-Motorola to split into two companies in 2009

(Adds Icahn and analyst comments, background)

By Sinead Carew

NEW YORK, March 26 (Reuters) - Motorola Inc (MOT.N: Quote, Profile, Research, Stock Buzz) said on Wednesday it would split into two publicly traded entities in 2009, indicating that it had no quick fix in sight for its money-losing handset division.

Motorola, which gave into demands by activist investor Carl Icahn, saw its shares rise 26 cents to $10.02. Analysts worried about another year of disappointment from Motorola, which is losing market share to rivals Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) and Samsung Electronics (005930.KS: Quote, Profile, Research, Stock Buzz).

"It could be 18 months before it happens, by which time the outlook for either of the businesses could be completely different," said London-based Nomura analyst Richard Windsor, who had hoped such a deal could be done this year.

Icahn said Wednesday afternoon he would still pursue his proxy battle with Motorola unless it agreed to have Keith Meister, chairman of Icahn Enterprises and manager of Icahn's $8 billion fund, on the board. He said the break-up was overdue and questioned why it would not be accomplished until 2009.

Motorola plans to create two publicly traded companies, separating its mobile phone unit from the rest of the business, which makes television set-top boxes and network equipment.

Some analysts see the split helping Motorola negotiate a joint venture or a sale for the cell phone business, but others fear that its top talent could leave amid the uncertainty.

"Folks know its going to take a while and the next couple of quarters is going to be tough," said American Technology Research analyst Mark McKechnie, who values the mobile devices business at about $2 a share or $4 billion, based on Motorola's current share price. Motorola stock briefly rose as much as 5 percent to $10.30 early Wednesday before giving back most of the gains.