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Spinoff could put Motorola in poorhouse

Posted Jun 17 2008, 05:03 AM by Kim Peterson
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Motorola wants to split off its cell phone division, but doing so could ruin its finances, analysts told the Wall Street Journal. The problem is that the new company would need about $4 billion in the first two years. That's about half the cash in company coffers.

If Motorola spun off the company and the cash needed, analysts said, it would be left with the rest of the cash and $4.2 billion in debt. Its credit rating would head to "junk," and it would have to scramble to raise money. Motorola's stock price closed at $9.12 yesterday.

Of course, the new division could try to find its own financing through private equity or a well-heeled partner, but that's problematic. The Street values the handset division at just $1 per share. Without its cell phone unit, Motorola would focus on walkie-talkies, handheld scanners and set-top boxes for television sets.

Perhaps it's no surprise, then, that the top candidate to head the new division has bailed. HP's Todd Bradley has withdrawn from consideration, so the worst executive job in technology is once again open.

Motorola shares are down about 50% from a year ago. 

Related reading:

Like torture? Motorola has a job for you

Motorola: New chairman on board for 52-week low

Motorola caves to Icahn, distraction cleared

Investors vote strong "no" on Motorola breakup 

Comments

 

Another example of pathetic journalism (or should I say tabloid ism?). I don't even like the company much and I dumped all my holdings long ago, but I just couldn't help commenting on the blatant negative false spin Ms Peterson decided to post. It jumped out at me it was so bad.  Her assertion "Without its cell phone unit, Motorola would focus on walkie-talkies, handheld scanners and set-top boxes for television sets." should make anyone remotely familiar with Motorola laugh with disgust. Ms. Peterson chose to belittle this struggling company by ignoring it's over 80 different products (aside from cell phones) which include a multi-billion $ public safety market as their "focus", and make it sound like they have reduced themselves to a toy and inventory support company.  It's funny, but the sad thing is there are thousands of bloggers out there doing this same false reporting and calling it journalism. Want to make someone or some company sound bad, just make something up and tell people you're a reporter.

I have to agree with anonymous. Motorola has a real problem with cellular handsets and that particular division. They haven't exactly managed the rest of the company as well as it has been in the past. That goes back all the way to Chris Galvin. Despite all of these facts, they still lead the Public Safety communications market better than all of their competitors combined. Now granted they still have a hard time in the business and industrial market where they compete against asian companies, but their strong suite still remains Public Safety and Homeland Security. Somewhere down the line maybe they will purge the old guard and become competitive across the board again.

I'd have to agree that Ms. Peterson should get a clue about Motorola before her writing shows more ignorance on that particular subject.

I too worked for Motorola for years and my heat pumps p____ for the Big M.

Just a correction, the goverment and public safety units are called TWO-WAY RADIOS, not walkie-talkies, learn the difference.

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