Why did Motorola now decide to split itself into two parts--spinning off the unprofitable mobile phone (handset) business to investors (hopefully on a non-tax basis)? Well, there could be several reasons why Greg Brown, Motorola's CEO might have done this now.
One: To boost up Motorola's sagging share price but the market reacted very lightly boosting the stock by 27 cents to little over $10. That's hardly a ringing endorsement.
Two: To attract top leadership talent to the mobile phone unit so that it can strive to be #2 in a brutally competitive business. Samsung is the present #2 and it is unlikely that Motorola can regain the lost #2 spot anytime soon. If someone actually gets Motorola to be #2 by 2009, it will indeed be a great achievement! It does not look like Motorola has found such a person because the market would have reacted far more positively if the two announcements were made together.
Three: TO eventually sell the unit to Samsung or LG Electronics or some other Asian companies that may be hungry to use such an acquisition to enter USA (think Lenovo in the PC business!). US$ is weak and some companies may see this as a good reason to acquire US companies.
Four: To pacify Carl Icahn--who has sued Motorola to obtain internal documents and has insisted on such a split for sometime now. CEO Brown insists that this decision was independent of the pressures put on by Carl Icahn but that seems to ring somewhat hollow.
Motorola is in the midst of transformation.
Motorola needs more than a governance shift. The industry--including Nokia-Siemens, Alcatel-Lucent, Ericsson, Nortel and others--is in the midst of profound strategic shifts. Successful transformation calls for more than governance shifts--which may be necessary given Carl Icahn's moves but are not sufficient to develop a clear vision of the future.
Update: Carl Icahn's response is a further support to my argument that the move is reall for Icahn's Sake..