Amid worries and optimism, Motorola to split into two in January

Android smartphones with little differentiation from rivals a worry for spin-off Motorola Mobility, analysts say

With Motorola splitting into two companies on Jan. 4, analysts believe the enterprise-focused business will thrive while the new consumer entity that makes Android smartphones will confront challenges for some time in an increasingly competitive market.

The change, officially called a "separation" in Motorola's Nov. 30 announcement of the move, involves spinning off 82-year-old Motorola's consumer, home products and smartphones product lines into a new company called Motorola Mobility Holdings (whose stock will be traded on the New York Stock Exchange under the symbol MMI).

The existing Motorola (stock symbol: MOT) will change its name to Motorola Solutions (symbol: MSI) and will continue to sell rugged handhelds for use in public safety, as well as enterprise-focused products like bar-code readers and RFID detectors, which are often used in settings such as warehouses.

Motorola Solutions should do well, three analysts said. The Motorola operations that it will handle have long been profitable. It has had success with products it acquired when it purchased Symbol Technologies and with its decades-old business of selling rugged two-way radios widely used by emergency responders globally.

Android market crowded

The worry is over Motorola Mobility. "It is starting to fire on most cylinders with the release of some compelling Android devices, including tablets, but I worry with all the competition in the market, they could be hurt by the latest, greatest devices," said Jack Gold, an analyst at J.Gold Associates.

"Every manufacturer is making a smartphone nowadays... and so nothing really sets Motorola apart," added Kevin Burden, an analyst at ABI Research. "They are making Android smartphones in the same way as others."

Sanjay Jha, Motorola Mobility's CEO, took over the smartphone helm at Motorola two years ago and has won praise for the way he has wielded his influence as an operations-focused executive, Burden said.

Jha appeared at an investor's conference in late November, where he declared one objective was to "win in smartphones" (download PDF).

Other companies are currently winning, such as Samsung, which has the largest share of mobile devices, including smartphones, in use in the U.S., according to a recent ComScore survey.

Motorola attributed sales growth for the overall company in the third quarter of 2010 partly to Android, with the mobile devices division showing a profit for the first time in more than three years. But Burden noted that one quarter's profit does not equate to long-term profitability.

When iPhone meets Verizon

Ken Dulaney, an analyst at Gartner, said one barometer of how Motorola does with Android smartphones will come into play when Verizon Wireless starts selling the iPhone, which some analysts believe will occur in March.

Motorola make several of the Android-based Droid smartphones that Verizon sells, and some experts believe many Android customers will gradually convert to iPhones as their two-year contracts expire.

But Dulaney said, "A lot depends on the whims of the consumer."

Business division 'rock-solid'

The Motorola Solutions division, meanwhile, has more than its successful reputation to look forward to, said Gene Delaney, executive vice president of product and business operations at Motorola Solutions. "We already have a rock-solid foundation that is really based on continuing to invest in R&D, with strong customer relationships that have really served us well," Delaney told Computerworld.

For example, Motorola Solutions design engineers take about a year to develop a new ruggedized device, he said, whereas the industry average amount of time it takes to design a consumer smartphone is six months.

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