Motorola to split in January amid worries and optimism

With Motorola splitting into two companies on Jan. 4, analysts believe the enterprise-focused business will thrive while the new consumer entity that makes Android smartphones will confront challenges for some time in an increasingly competitive market.

The change, officially called a "separation" in Motorola's Nov. 30 announcement of the move, involves spinning off 82-year-old Motorola's consumer, home products and smartphones product lines into a new company called Motorola Mobility Holdings (whose stock will be traded on the New York Stock Exchange under the symbol MMI).

The existing Motorola (stock symbol: MOT) will change its name to Motorola Solutions (symbol: MSI) and will continue to sell rugged handhelds for use in public safety, as well as enterprise-focused products like bar-code readers and RFID detectors, which are often used in settings such as warehouses.

Motorola Solutions should do well, three analysts said. The Motorola operations that it will handle have long been profitable. It has had success with products it acquired when it purchased Symbol Technologies and with its decades-old business of selling rugged two-way radios widely used by emergency responders globally.

Android market crowded

The worry is over Motorola Mobility. "It is starting to fire on most cylinders with the release of some compelling Android devices, including tablets, but I worry with all the competition in the market, they could be hurt by the latest, greatest devices," said Jack Gold, an analyst at J.Gold Associates.

"Every manufacturer is making a smartphone nowadays... and so nothing really sets Motorola apart," added Kevin Burden, an analyst at ABI Research. "They are making Android smartphones in the same way as others."

Sanjay Jha, Motorola Mobility's CEO, took over the smartphone helm at Motorola two years ago and has won praise for the way he has wielded his influence as an operations-focused executive, Burden said.

Jha appeared at an investor's conference in late November, where he declared one objective was to "win in smartphones" (download PDF).

Other companies are currently winning, such as Samsung, which has the largest share of mobile devices, including smartphones, in use in the U.S., according to a recent ComScore survey.

Motorola attributed sales growth for the overall company in the third quarter of 2010 partly to Android, with the mobile devices division showing a profit for the first time in more than three years. But Burden noted that one quarter's profit does not equate to long-term profitability.

When iPhone meets Verizon

Ken Dulaney, an analyst at Gartner, said one barometer of how Motorola does with Android smartphones will come into play when Verizon Wireless starts selling the iPhone, which some analysts believe will occur in March.

Motorola make several of the Android-based Droid smartphones that Verizon sells, and some experts believe many Android customers will gradually convert to iPhones as their two-year contracts expire.

But Dulaney said, "A lot depends on the whims of the consumer."

Business division 'rock-solid'

The Motorola Solutions division, meanwhile, has more than its successful reputation to look forward to, said Gene Delaney, executive vice president of product and business operations at Motorola Solutions. "We already have a rock-solid foundation that is really based on continuing to invest in R&D, with strong customer relationships that have really served us well," Delaney told Computerworld.

For example, Motorola Solutions design engineers take about a year to develop a new ruggedized device, he said, whereas the industry average amount of time it takes to design a consumer smartphone is six months.

A $1 billion annual R&D budget will keep Motorola Solutions in the forefront, Delaney said. Nearly all the various products sold by the Solutions group lead their respective markets, he noted.

Motorola Solutions can attribute its success partly to the fact that designers spend generous amounts of time with customers to see how they need to use Motorola products on the job, he said, citing the example of firefighters who use radios for mission-critical rescues inside of burning buildings.

"We have psychologists who see how people do in moments of terror, so they can make decisions on the screens or knobs on a radio ... and whether to put a knob at a 45-degree angle to make it easier to use," Delaney said.

Now that RFID prices have gone down, Motorola Solutions expects to see growth in the use of RFID chips in retail settings, potentially creating a strong market for Motorola's sales of RFID readers, Delaney said.

Another promising area is the use of LTE wireless for public safety data transmissions, including video, he said.

Motorola expects that many communities in the U.S. will begin to build private LTE networks for use by emergency groups as federal officials debate the fate of wireless spectrum.

Windows users 'embedded'

Delaney also said that Motorola Solutions will continue to remain devoted for many years to the older Windows Mobile OS, Versions 6.1 and 6.5, now being dubbed Windows Embedded, even though Motorola Mobility strongly supports Android.

"We need to provide what our customers need. In the enterprise, our customers are still using Microsoft-based OS's and apps," he said. "It's an embedded base."

Delaney said Motorola Solutions will have about 20,000 employees. Motorola Mobility is also expected to have 20,000 workers, according to a Motorola document on the company's Web site (download PDF).

What about the workers?

The first call for a split-up of Motorola came in 2007 from investor Carl Icahn. At the time, the suggestion incited an uproar inside the company, but some of that anxiety seems to have subsided.

The ill feelings some workers felt three years ago have "very definitely" gone away, Delaney said. "Today, it's all about focus—strong focus—on the customer."

Morale is fantastic, and people are excited about the future," he said. "There are some jobs changed out, which is the typical hygiene of a business, [but] the employee base is buzzed."

[Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld.]

This story, "Motorola to split in January amid worries and optimism" was originally published by Computerworld.

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