Motorola - hiving off handset manufacturing

Motorola to split into two companies

Motorola Inc said on Wednesday it would split into two publicly traded entities to separate its loss-making handset division from its other businesses, sending its shares up more than 10 percent.

The move, which comes amid an intensifying proxy battle against activist investor Carl Icahn, would take the form of a tax-free distribution to Motorola's shareholders and is expected to be completed in 2009, the company said.

Motorola has been losing handset market share and is now ranked third in the world. The two entities it plans to split into are Mobile Devices, and Broadband & Mobility Solutions. The latter consists of its network equipment, enterprise and public safety businesses.

It said the creation of two companies would improve flexibility, increase management focus and provide more targeted investment opportunities for shareholders.

Motorola Chief Executive Greg Brown said in a statement that the company has started a global search for a new CEO for the mobile devices business.

The move comes after Motorola said in late January that it was conducting a strategic review of its business that could lead to a separation of the handset business.

The company is engaged in a proxy battle with Icahn, its second-largest shareholder. Icahn has proposed a slate of four directors to the board and is suing Motorola to force it to hand over documents related to its mobile devices business.

Motorola said on Wednesday there was no assurance the planned split, which is subject to further financial, tax and legal analysis, would occur.

Its shares rose to as much as $10.82 before settling at around $10.32 in premarket trading, still up 5.7 percent from their close on Tuesday at $9.76 on the New York Stock Exchange.