Motorola’s party line on its mobile phone spinoff: Wait and see!
Motorola (MOT) CEO Greg Brown held a conference call this morning to discuss his plan to split into two companies next year. But he wasn’t very talkative. Analysts came armed with questions about how the two companies would be valued, who would get to keep the Motorola brand, whether either division was still for sale, etc. Brown’s standard non-answer: We’ll talk about it later.
Understandable — splitting Motorola in two will be a complicated, potentially messy process, and Brown is smart not to set up any specific expectations. But frustrating.
8:58 Call ends.
8:57 How reconcile extra costs of duplicating extra costs to create two companies? We have corporate functions that serve the individual businesses today. Already pretty structured. As we move forward, will have opportunities to look at overall cost structure. Any speculation is subject to review process, will take several months to work through implications. Will do so with requisite diligence, etc.
8:55 Wouldn’t it have made more sense to announce this after selecting new CEO? Why urgency? Board has reviewed strategic opportunities for a while. Timing of today is result of strategic advisor/board/management work. (Sure it has nothing to do with CTIA show next week?) Think it’s a valuable component: More clarity to a prospective CEO. Assuming Icahn gets four board seats in May, what type of control/power/blockage give him over direction of company setting today? Not going to get into that.
8:53 Any key intellectual property you might need to split? All of our businesses are innovation leaders with strong IP. Will come up with a strategy for both. In terms of supply chain, would be premature to speculate on that. Those things will have to sorted out in several months.
8:51 Open into bringing new talent into MOT beyond just CEO? Most of changes have been directed and driven by me. Whoever leads mobile devices needs to be a proven leader, needs track record, preferably have technology or consumer electronics expertise.
8:50 How long will CEO search take? Well underway and has been for several weeks. Have retained an executive search firm. Obviously a top priority for me. Wouldn’t speculate on timing but remains a top priority. How about CFO? Mobile devices has new CFO, has experience running a number of different businesses, will keep that role.
8:48 Will brand go to handset business? You’ve already lost a few key people. What doing to make sure more don’t leave during process to find new CEO? TBD! Clearly important to a lot of parties. Will play itself out. In terms of management changes, have been running day to day mobile phone biz, I certainly feel that there’s been an increased level of communications, collaboration, alignment. Reasonable to expect changes during any transition. Take your point on the value of engineers, designers, etc. Taking additional steps around retention and alignment.
8:47 Capital structure: Outside infusion of capital for one or both? Excited and enthusiastic about shareholder value creation. Beyond that, subject to outcome of financial/regulatory/tax/legal review that will take several months.
8:46 Any discussions with customers? Feedback? As you might expect, couldn’t have specific discussions with customers. Having said that, have had extensive conversations with customers around the world. They want MOT’s mobile phone business to work. Get focused and more consistent execution back, which we’ve struggled with.
8:44 Status of discussions with Icahn camp? Have discussed board nominees with Carl, proposed two nominees, and declined that. Won’t get into specifics beyond that. Fair to say you discussed split-off with them? Our board has reviewed opportunities for a while. Today’s announcement is an outcome of Jan. 31 announcement. Involved management, board of directors, and input from strategic advisors.
8:42 What’s different that will speed up mobile phone recovery? Improved management focus, capital structure tailored to individual business needs, will help us going forward. Enables opportunities to attract a world class CEO. What could it do between now and then? A lot more work that needs to be done; will be a product led recovery. Will take some time.
8:41 Assuming mobile phones will be profitable at time of spinoff? Not going to speculate or make forward projections. Proposed capitalisation? No, at this time we’re early on, subject to financial/tax/legal considerations. Details will unfold accordingly.
8:39 Announced search for mobile devices; clearly a top priority. Greg Brown will return to being CEO of Motorola. Who gets the brand? Valuable to mobile devices and other parts of the business. Important to success of many of our businesses. Will formulate and refine. Does this rule out a shopping process of selling division or JV with another player or even outside PE investment? This announcement is a result of action undertaken since Jan. 31 when we talked about strategic and structural alternatives. Mgmt and board are set on this path of action for shareholder value. Wouldn’t get into any other hypotheticals beyond that.
8:37 What level of disruption could happen in handset business? How hard to break companies up? Early on, will take some time to work through a lot of different issues for segregation, intellectual properties, brand, etc. We think this will actually help from a clarity of direction standpoint. Will “facilitate and enable” a more accelerated recovery. Ok! Will decide on IDEN breakup over time.
8:36 Q&A begins.
8:35 With brand, people, think mobile phone biz will be able to thrive. Same for broadband/wireless gear. In closing, as a result of evaluation, pursuing two public companies. Trying to attract and retain mobile phone leadership. Before Q&A, due to timing of call, ask that you save performance questions for earnings call next month.
8:34 Tax-free distribution expected to happen next year. Bear in mind, no assurance that any transaction will occur. Timing and terms could differ. Shareholders would own two independent public companies. Not sure which entity will be distributed. Top priorities will not change: Trying to fix mobile phone business via compelling products, etc.
8:33 Each business will have global scale, improved flexibility, capital structure tailored to business needs, closer management focus. Also expect to enhance pace of mobile phone recovery to industry leader, create shareholder value, etc. Have been conducting a global search for a new leader, as they’ll be CEO of a new public company.
8:32 Greg Brown and new CFO Paul Liska. Plan to split into two companies: Mobile Devices and Broadband & Mobility Solutions. Since January, undertaken a review process with strategic advisors. Today’s announcement will have many benefits.
8:30 a.m. ET call begins