Spinoff could put Motorola in poorhouse
Posted
Jun 17 2008, 05:03 AM
by
Kim Peterson
Rating:
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 HP's Todd Bradley has withdrawn from consideration, so the worst executive job in technology is once again open.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.
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