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Motorola Hangs Up on Handsets

Thursday, 31 Jan 2008 | 6:22 PM ET
Motorola, Inc.
Motorola, Inc.

It is a stunning move by the pioneering name in mobile phones and the best data yet about just how deep the company's problems run: Motorola announced late Thursday that it is seeking alternatives for its handset business that likely will mean a sell-off of the division.

You gotta hand it to Richard Windsor at Nomura International who, earlier this week, issued a note to clients suggesting this is exactly what would happen. He nailed it. Motorola saw sales plunge in the fourth calendar quarter last year, down 38 percent in mobile devices.

Motorola has consistently, and stunningly, yielded key competitive ground to rival Nokia , which itself posted a very strong quarter last week. Not to mention its failure to capture any meaningful traction in so-called "smart phones" where Apple is seeing nice success with its iPhone, and Research in Motion continues to enjoy robust Blackberry sales.

Pablo Perez-Fernandez at Global Crown Capital tells us late today that the move is a good one for the short-term, but longer term it probably won't mean much. I mean, who's going to buy it? And why? The handset business has been an albatross ever since the company was unable to come up with a follow-on success story to the RAZR.

The issues were so dire that they ultimately cost Ed Zander his job, and led top lieutenant Ron Garriques to get a job with Dell.

In fact, a source following the situation closely tells me that Motorola would not have made this move without having a buyer for the handset business in mind already. Further, he says, advanced negotiations to that end are already underway between Motorola and Dell.

New CEO Greg Brown has apparently convinced the board that a strategic move of some sort is precisely what Motorola needs in order to usher in the next chapters of its story.

Brown says in a release, "We are exploring ways in which our Mobile Devices Business can accelerate its recover and retain and attract talent while enabling our shareholders to realize the value of this great franchise."

But the company acknowledges that one of the options is to separate Mobile Devices from its other businesses.

Questions? Comments? TechCheck@cnbc.com

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