is tumbling toward a big four-way breakup.
With its money-losing mobile phone unit set for a spinoff next year, Motorola has also been exploring a plan to sell its telecom networking business and possibly its set-top cable TV operation, Oppenheimer analyst Ittai Kidron writes in a note Friday.
"Our contacts suggest Motorola has already made initial steps in evaluating its options in executing this strategy," Kidron writes.
The possibility of a dramatic four-way separation underscores the severity of the tech spending slowdown and the pressure Motorola is under to avoid a future financial meltdown.
Kidron says that Motorola is in "advanced talks" with China tech shop
over the possible sale of its telecom equipment unit. And according to Kidron, the company is also in "early" discussions to sell its TV set-top box business.
Motorola declined to comment.
The plan would leave a core wireless infrastructure and device business serving government and corporate customers. Motorola is a top supplier of two-way radio gear and secure wireless communications networks to users like public safety agencies, the military and retailers with large warehouse operations.
Similar to the
four-way breakup plan
first pushed and later dropped by Motorola investor Carl Icahn, Kidron sees the potential business separations as a positive for the stock. "They reflect management's ongoing attempts to continue to focus the company's businesses and unlock value," Kidron wrote.
Motorola's prospects however, continue to hang on its drooping phone business.
Motorola has fallen from
the top five phone makers as rivals like
remained strong in cell phones and
Research In Motion
took marketshare in smartphones.
Separating the phone unit from the rest of the company would certainly relieve the biggest drag on the business. But the challenge for handset chief Sanjay Jha is turning the business around so it can at least break even and not require additional financing once independent. His focus on
Android-powered smartphones expected in the fourth quarter may help, but it's a long shot in a field of favorites like the
Pre, the iPhone, BlackBerrys and new Nokia touchscreen designs.
Jha told analysts on an earnings conference call in April that the spinoff of the handset business depends on the health of the credit market and the success of its Android smartphone plan.
A lot rides on Motorola's mobile phone recovery. Its collapse has landed Motorola in somewhat of a financial crisis.
The company's operating cash flow last year fell 69% to $242 million from $785 million in 2007. The company has $63 million in debt payments due this year and is carrying $3.9 billion in long term debt.
As for cash, Motorola is in a tricky position.
The company said on its April earnings call that it had $6.1 billion in cash, down from the $7.4 billion just three months earlier. About $1 billion of that cash burn came from payments to cover a $700 million gap in the receivables it sold and $200 million on restructuring payments.
But the $6.1 billion figure is a little deceptive. About $1.24 billion is unrestricted and available here in the U.S., with the bulk, some $4.6 billion, sitting overseas and subject to taxes if brought stateside. The company says it can repatriate those funds with minimal cash tax cost. Motorola also says it "believes it has more than sufficient liquidity to operate its business."
And liquidating a couple of businesses would certainly help support that proposition.