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Motorola might hang up on handsets

/ Source: The Associated Press

Struggling cell-phone maker Motorola Inc. said Thursday it is considering separating the handset unit from its other businesses in an effort to snap a deep slump that has followed its meteoric success with the Razr.

Under pressure from unhappy investors for the past year, Motorola signaled a willingness to break itself up after more than a year of dismal results and declining market share.

The announcement after the stock market closed sent shares in the Schaumburg-based company up more than 10 percent.

Carl Icahn, the billionaire financier who lost a proxy battle with the company in 2007, said he was pleased to hear that Motorola is exploring a proposal he made last year but pledged another fight for board seats this spring.

"This announcement by Motorola will not deter us from that effort," he said in a statement. "We believe Motorola is finally moving in the right direction but certainly still has a long way to go."

Motorola said in a statement that separating the mobile devices business, which is dominated by cell phones, would "permit each business to grow and better serve its customers." Its two smaller businesses are home and networks, which sells TV set-top boxes and modems, and enterprise mobility solutions, which sells computing and communications equipment to businesses.

But it is the badly underperforming cell-phone unit which prompted the move.

"We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise," Chief Executive Greg Brown said in the company's statement.

A Motorola spokeswoman did not return phone calls seeking more specifics.

Morningstar analyst Jordan Zounis said the ambiguously worded statement could mean a spinoff, joint venture or outright sale.

"If the mobile device unit is separate from the firm, my guess is that it would most likely be in the form of an outright sale," he said. "A standalone business would be tough to spin off in the current environment, given where Motorola's infrastructure is right now."

Trading in Motorola's stock temporarily came to a halt after hours before shooting up $1.23 to $12.73. Shares had risen 21 cents to $11.50 in the normal trading session — down 28 percent in 2008 and 56 percent since hitting a six-year high of $26.30 in October 2006.

Brown, who took over Jan. 1 following Ed Zander's resignation, last week bluntly portrayed a lack of progress toward a recovery when discussing Motorola's weak fourth-quarter results. The company's profit fell 84 percent, handset sales were down 38 percent, and he said its share of the world handset market continues to fall after being reduced by nearly half since hitting 23 percent at the end of 2006.