February 11, 2008 / 6:40 PM / 11 years ago

Motorola committed to mobile phone business

BARCELONA (Reuters) - Motorola Inc MOT.N said on Monday it is “fully committed” to its mobile phone business and its strategic review is aimed at bringing about a “product-led” recovery for the loss-making division.

A man rides past a Motorola mobile phone shop in the downtown of Vietnam's southern Ho Chi Minh city May 31, 2006. Motorola Inc said on Monday it is "fully committed" to its mobile phone business and its strategic review is aimed at bringing about a "product-led" recovery for the loss-making division. REUTERS/Kham

The world’s third-largest cell phone maker said in late January that it was considering separating its mobile devices unit as part of a “structural and strategic realignment” to help it recapture market share and enhance shareholder value.

“I don’t want there to be any confusion,” Chief Executive Greg Brown said at a reception at the Mobile World Congress in Barcelona. “Motorola is fully committed to the mobile devices business and I am fully committed to mobile devices.”

Motorola has been losing market share to rivals like Nokia Corp NOK1V.HE and Samsung Electronics Co Ltd (005930.KS), after failing to come up with a strong successor to its once-dominant Razr phone.

The company is under pressure from activist investor Carl Icahn, who owns a 5 percent stake in Motorola and says breaking up the company could unlock more value for shareholders.

“We’re going to be expeditious about our review,” Don McLellan, Motorola’s senior vice president for corporate development and strategy, said in an interview on the sidelines of the conference, the world’s largest wireless fair.

“The market had dramatically undervalued mobile devices. That was a concern to us,” McLellan said in an interview, adding, “We know it can regain market leadership.”

Motorola executives declined to comment on a report in the Wall Street Journal that the company was in talks with Nortel Networks Corp NT.TO to combine their wireless infrastructure units, which make network equipment for phone carriers.

The paper said the talks were separate from any plans for Motorola’s handset division. Any deal would follow a wave of mergers in the global telecommunications sector, as equipment makers combine in a bid to gain economies of scale and more pricing power against telephone carriers that are also merging.

McLellan said Motorola’s focus was on its mobile devices unit, as other businesses were doing “extraordinarily well.”

When asked if that meant the mobile phone unit would be sold or spun off, the strategist said: “We’re not putting boundaries on it. We’re being as open as we can.”

McLellan said the review “isn’t a situation of trying to get out of something. It’s a situation of trying to fix. This is a franchise we believe needs fixing.”

Analysts value the phone unit at between $9 billion and $12 billion, which would be less than two-thirds of its 2007 mobile sales. Spinning off the phone unit could attract focused investors willing to pay a premium.

Yankee Group cell phone analyst John Jackson said Motorola’s comments did not shed any more light on which direction the company might take the division.

“I thought it was perfectly opaque,” he said, adding that Motorola would have to be committed to the phone unit whether it meant selling it off or keeping it within the company.

As for the possibility of a joint venture with Nortel on the wireless infrastructure assets, Jackson said: “It’s questionable whether Networks remain strategic. They’ve been disciplined in shedding off non-core units.”

Dan Maloney, head of Motorola’s television set-top box and network equipment unit, said that it made sense for Motorola to offer carriers everything from mobile phones to network gear.

“I think there’s value to putting end-to-end solutions together,” he said, but noted that he would not be the one making the decision about the fate of his unit.

Motorola shares closed up 2.75 percent at $11.57 and Nortel’s U.S. shares NT.N finished down 1.63 percent at $10.89, both on the New York Stock Exchange.

Reporting by Sinead Carew; editing by Gerald E. McCormick and Tim Dobbyn

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