Motorola (MOT) has not had a real strategy or good explanation of what it is for years. The company got into the handset market very early in the history of the industry, in 1991. It bought the General Instrument set-top box company in 1999 for $11 billion. Motorola acquired Symbol Technologies in 2007 to enter the enterprise mobility tech sector. None of these businesses bears anything more than a very modest relationship to the other. There are no clear “synergies” among them and the ownership of this set of assets did not create any major cost savings.

Motorola began to think about breaking itself into pieces over two years ago and announced in March 2008 that the company would take its handset business and make it into a separate entity. Motorola also said it would auction off some of its assets. None of those things happened, and Motorola ended up with two CEOs, an awkward situation created because the board of directors had decided that the firm should be two companies and not one.

Motorola has scuttled its two-year-old restructuring plan in favor of yet another according to The Wall Street Journal. The Motorola board and management have begun a process to combine the firm’s set-top consumer business and handset operations and place them in a new public company. The revenue of that new entity would be about $7 billion according to the Journal. Motorola was in 2009, with all of its divisions intact, a $22 billion revenue operation.

Motorola can be cut into any pieces the board would like and it will not save the company from the disaster that nearly ruined its handset operation. The firm’s RAZR cell phone allowed Motorola to capture over 22% of the global handset original equipment manufacturing industry. The RAZR was not replaced with another successful model. The trouble took Motorola from sales of $48.2 billion in 2006 when the firm had $4.1 billion in operating profit to sales of $22 billion in 2009 and an operating loss $111 million. That was at least an improvement over the 2008 operating loss of $4.2 billion created by a collapse in Motorola’s handset business and the lay-offs of thousands of workers.

Nothing that Motorola will do in terms of a plan to break the company apart can solve the problem that it sold only 12 million handsets in the fourth quarter and had only 4% of the global market. The largest handset company in the world, Nokia (NOK), has a 38% market share and both Samsung and LG, based in Korea, have close to 20% each. Sony Ericsson also has a large franchise in the industry and the smart phone end of the sector has further competition from RIM (RIMM), Apple (AAPL), and China-based firm HTC. Motorola hopes to get a big part of the high-end smart phone sector with its new Droid, which has sold relatively well since it was introduced.

Motorola’s management is caught up in the idea that the rearrangement of chess pieces can change the outcome of the game. Motorola will have to play its pieces where they sit on the board now, and its handset operation is still in deep trouble. Spin-offs and restructuring  plans can’t help that.

Douglas A. McIntyre

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