Was Share-holder equity unleashed by the Motorola Split?
Companies splitting business units off is a hot topic in the investment world today. I personally don’t believe that there are many advantages to it, especially in companies that are highly integrated. That said, the Motorola split was fairly successful, albeit that success had a huge dose of luck.
Prior to the annoucement of Google’s plans to acquire Motorola Mobility, Motorola Mobility’s market cap was around $6 billion. Motorola Solution’s market cap was around $15 billion. This together was $21 billion market cap, which was about the same market cap for Motorola prior to the split in beginning of 2011. The investors who had pushed for the split had sold the company and other investors on the idea that splitting the company would unlock additional shareholder value, just from having 2 separately trading entities. It did not.
The second reason for splitting the business was to allow for another company to purchase either half of the company more easily. Thank goodness, they got lucky. With Google’s impending purchase of Mobility, the company’s halves are worth $11 billion (Mobility) and $15 billion (Solutions) for a total of $26 billion. This did unlock billions of dollars of value, which quite honestly given the context of the acquisition could have happened without splitting the company.
How are the pieces doing?
On the bright side, all the former divisions of Motorola seem to be doing a little bit better with growing revenue and profits (or reducing losses).
The untold story is that of the downsizing that has occurred in the wake of the split. Motorolans are looking like an endangered species.
Motorola Mobility: 19,000 employees 700 laid off earlier this year [source], and 800 more announced [source] for a 7.9% reduction of staff
Motorola Networks (now part of Nokia Siemens Networks): 7,500 employees were transferred to NSN and 1,500 are being axed [source] for a reduction of 20%.
Motorola Solutions: 23,000 employees 175 laid off [source] for a reduction of 0.7%.