Trouble at Motorola: No. 3 handset maker may spin off or sell Mobile Devices business

motorolaLooks like the rumors and back-room talk about Motorola are true: The company is looking to spin off (or “strategically realign”) its Mobile Devices business, or sell it outright.

Which begs the question: How the heck did Motorola — the company that delivered the first commercial portable cellular phone in 1983 — get to this point? Or, more recently, how did the company that made cell phones fashionable and highly desirable with the Razr and Krzr fall so low as to even think about selling off its Mobile Devices division?

As a friend who works at Motorola told me today, “Can you imagine Motorola not playing in that space anymore? That’s f***** up.”

razrRumors have been floating around Motorola, the No. 3 handset manufacturer, for months, and they’ve seeped into the press here and there. Its fourth quarter and 2007 earnings were poor, as expected, with no end in site for the slide. The company made $9.65 billion through the final quarter this year, down 18.2 percent from 2006.

But now that Motorola has publicly acknowledged its situation, employees of the storied company are plenty worried about the Mobile Devices’ future no matter what the company brass says.

“The CEO (and President Greg Brown) sent out an email to the employees after the markets closed yesterday,” my friend said. “The message was similar to what I’ve seen online (here and here) but worded a little differently.”

In essence, Brown told employees not to worry and not to fear about losing their jobs, but my friend says that’s “bullshit” as engineers in the Mobile Devices group have been looking for new opportunities outside of Motorola. “If I worked in Mobile Devices I’d be looking for a new job,” my friend said.

Besides mobile devices, Motorola has two other business units that are performing well, including network equipment (television set-top boxes and wireless network infrastructure) and an enterprise division.

One analyst, Nomura International’s Richard Windsor, thinks Motorola may become an “enterprise and government” company and raises speculation that a Chinese corporation might scoop up troubled Motorola.

It’s kind of sad, really. But unless Motorola gets back into the labs and innovates, all will be lost on the consumer front. The climb back to the top looks steep indeed.

Nokia remains the No. 1 handset maker, and Samsung took over the No. 2 spot from Motorola. Apple’s iPhone now has nearly 20 percent of the smart phone market, and it’s been available less than a year. Research In Motion’s Blackberry line continues to dominate enterprise wireless and is making headway into the consumer market.

Who knows. Motorola is still a great company. Greg Brown comes in, restructures, makes good decisions, and profitability returns. The question is whether Mobile Devices will be part of the comeback.

last100 is edited by Steve O'Hear. Aside from founding last100, Steve is co-founder and CEO of Beepl and a freelance journalist who has written for numerous publications, including TechCrunch, The Guardian, ZDNet, ReadWriteWeb and Macworld, and also wrote and directed the Silicon Valley documentary, In Search of the Valley. See his full profile and disclosure of his industry affiliations.

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