Motorola Cellphone Business to Grab Big Parachute in Spinoff

Mototola to spin off cell-phone business
Mototola to spin off cell-phone business

Motorola (MOT) is reportedly gearing up to send its cellphone business off with a substantially larger piece of the dowry when it splits the company in two next year, according to a report in the Wall Street Journal.

Motorola's money-losing cellphone business and its slightly profitable cable set-top box cousin are expected to be merged into a new company called Motorola Mobility, receiving roughly $3 billion to $4 billion as part of its send off, and also be freed from debt, according to the report.

The remaining company, expected to be called Motorola Solutions, would receive a much smaller slice, but then again it's comprised of Motorola's profitable Enterprise Mobility and Networks divisions, which make public safety radios and telecommunications network equipment. The Enterprise Mobility unit posted an increase in its first-quarter sales over last year.

Under the proposed restructuring, Motorola plans to buy back most of its $3.9 billion in debt. The company's cash, which amounted to $8.5 billion in the first quarter, will be used to pay off most of the debt and the remainder distributed to the two companies, the bulk of it going to Motorola Mobility.

By positioning the companies with little debt and a healthy pocketbook, the idea is to improve the credit rating of the new companies, the report noted, citing sources. And in the case of Motorola Mobility, it will be in a far better position to acquire companies and pump out new phones.

Despite its flagging financial performance, the mobile device business still plans to unveil an extensive lineup of smart phones based on Google's (GOOG) Android mobile operating system. Verizon (VZ), which carries Motorola's phones, gave a sneak peak of Motorola's Droid X phone on its site the other day and will officially launch it next week.

Originally published