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RIM, Apple May Gain From Motorola Split

Robert Holmes

Motorola's (MOT) decision to splinter off its handset unit has come far too late, and it will actually provide a spark for smart-phone makers Research In Motion (RIMM) and Apple (AAPL), according to an analyst.

On Wednesday, Motorola announced it will divide its operations into two separate publicly traded companies, one for its mobile phones and the other for network gear and TV set-top boxes. The company expects that the separation of its businesses, if completed, would take place in 2009.

According to RBC Capital's Mike Abramsky, other smart-phone makers will see a hefty gain in market share as Motorola's for-the-moment leaderless and long-struggling handset unit is separated from the remainder of the company.

The decision is coming just as smart-phone adoption "is reaching an inflection point, offering an opportunity for RIM and Apple to gain share," said Abramsky in a research note. "RIM is positioned to take share in Motorola's key CDMA markets. Poised to launch a 3G iPhone, Apple ... is expected to continue rolling out innovations and gaining [market] share."

Shares of Motorola were falling 40 cents, or 4%, to $9.62. RIM was shedding $3.28, or 2.8%, to $114.86, and Apple was off 87 cents, or 0.6%, at $144.19.

Additionally, Abramsky noted that employee turnover, restructuring and strategy changes will likely put Motorola in organizational disarray until the company's 2009 separation target.

"Carrier disruption over Motorola's roadmap may impact strategic relationships with Motorola and increase 'shelf space' at carriers for RIM and Apple, given the clarity and compelling nature of their roadmaps," he said. "RIM in particular with its broad distribution is well positioned, as it is viewed as an enabler of carriers' mobile data strategies, offering a delivery platform to drive adoption of value-add mobile messaging, content, navigation, browsing, etc."

Abramsky isn't alone in his belief that Motorola's planned split may be too far out. In a letter released late Wednesday, billionaire investor Carl Icahn, who has waged a proxy battle with Motorola's board for over a year, called the announcement to divide the company "a step in the right direction," but also questioned the length of time to get it done.

"Time is of the essence and decisive action is required to reposition the Mobile Devices business for success as an independent company," said Icahn. "Why will it take you until sometime in 2009 to accomplish the separation? Do you intend to carry out your proposals or will it be a repeat of last year's proxy fight strewn with a string of broken commitments?"