(Associated Press via NewsEdge) Motorola's investors were placated for at least a day, and sent its battered stock soaring 10.3% last week, after the company signaled it may get out of its trademark cell-phone business.
Industry analysts said the handset maker could get at least $5 billion for the troubled unit. But they cautioned that a sale, spinoff or joint venture won't alter the unit's severe challenges and said the lack of promising products in the pipeline may be a deterrent to any buyer.
The company also faces the prospect of more job cuts and a repeat proxy fight with the shakeup-minded Carl Icahn, who nominated four new members for the board of directors and told Motorola he has increased his stake to 5%.
Wall Street applauded Motorola's decision to explore alternative strategies, issuing several upgrades.
Thecompany's shares jumped $1.19 to $12.69 in Friday trading after rising as high as $12.97. That's only half their value of 16 months ago but a whopping 35% higher than last week's 4 1/2-year low of $9.43.
Underscoring its commitment to change, Motorola said late Friday that new CEO Greg Brown had assumed day-to-day responsibilities of the phone business, which had been led since last summer by Stu Reed.
Citigroup analyst Jim Suva called the decision to make big changes under new CEO Greg Brown 'a potentially life-saving move for the mobile devices business,' the cell phone unit, which accounted for $19 billion of Motorola's $36.6 billion in sales last year.
'Despite its recent troubles, particularly in Western Europe, we believe that Motorola is still an admired brand in North America and throughout much of Asia, and the handset business could potentially be attractive to an ambitious, aggressive local player,' he said in a research note.
But Motorola's timing is poor in view of the near-recession. Also, the company that rode its iconic Razr phone to a phenomenal comeback in the world market in 2005-06 now has not only a weak product lineup but other problems likely to dog it into 2009 and beyond.
Motorola's troubles stem not only from the lack of a top-selling successor to the Razr but also from its aggressive price-cutting to try to catch Nokia, the runaway leader in handset market share.
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