Related Articles
Motorola is looking to sell its business for TV set-top boxes and network equipment for about $4.5 billion, according to a Wall Street Journal report Wednesday.
The newspaper cites people familiar with the matter who say Motorola is in the early stages of finding a buyer for the business unit. Potential buyers include private-equity firms and competing equipment makers.
Motorola representatives declined to comment, citing a company policy not to comment on speculation or rumors.
The company has three major units: mobile devices, enterprise mobility, and home and networks mobility. And all three business units have been struggling over the past year. It had planned to spin off its mobile-device unit, which makes the company’s cell phones, but that plan was put on hold when it became clear that the company wouldn’t be able to find a buyer. In the meantime, it brought in co-CEO Sanjay Jha, who has been trying to revive the ailing mobile-device business.
Motorola, once the No. 2 handset maker around the world, got into trouble after the company couldn’t come up with a hit phone to replace the popular Razr. And over the past two and half years, it’s been fighting an uphill battle in the high-end smartphone market against newer players such as Apple and Research In Motion.
About a year ago, Jha reset the company’s focus, and Motorola committed itself to building phones using the new Google Android operating system. The first of these phones, the Motorola Cliq, which is being sold on T-Mobile USA’s network, and the Motorola Droid, which is being sold exclusively in the United States by Verizon Wireless, went on sale this fall.
So far, reviews have been good. And the Droid, in particular, has gotten a lot of attention. Motorola expects to launch another 20 Android devices next year.
While prospects for the mobile market are improving, the company is still losing money in this division. For the third quarter of 2009, sales for Motorola’s mobile-handset business dropped 46 percent to $1.69 billion, and it lost about $183 million, compared with a year-ago loss of $840 million.
Motorola’s enterprise mobility unit, and its set-top box and networking-gear division, have been keeping the company afloat for the past couple of years. But now there are signs that these businesses are also hitting hard times.
During the third quarter, revenue in the enterprise mobility business was down 13 percent to $1.77 billion. Still, this division generated a net income of $306 million, down from $403 million a year ago.
Motorola also saw declines in its home and network mobility business. This business unit includes TV set-top boxes and wireless-networking equipment. This business unit posted the most sales for the company during the quarter, bringing in $2.01 billion. But this figure was down about 15 percent from the same quarter a year ago. In addition, the company’s profit was about $199 million, down from $263 million during the third quarter last year.
Motorola blamed the slip in profits on a decline in sales of home entertainment devices to cable and phone companies. That said, the division still remains Motorola’s most profitable.
Even though sales and profits may be down this year for the TV set-top box and networking business, the division is still attractive to potential buyers. The main reason is that Motorola has very strong market share in the set-top box market, where it competes head-to-head with Cisco Systems’ Scientific Atlanta brand.
The Wall Street Journal article said private-equity firms Texas Pacific Group and Silver Lake Partners are interested in the company. And it’s likely that Motorola competitors such as Samsung Electronics, Huawei Technologies, Nokia Siemens, Pace, and Ericsson may be interested in this business to bulk up their presence in the U.S. market.
But analysts warn that selling this division now could hurt Motorola’s turnaround effort. RBC analyst Mark Sue told Reuters that Motorola needs the set-top box and networking business to help fund operations for the mobile-device business.
“(The mobile-device business) hasn’t really recovered fully yet, so it would be a little too early to cut off the lifeline,” he said to Reuters.
The Wall Street Journal said investment banks JPMorgan Chase and Goldman Sachs are advising Motorola on the possible sale.
