Motorola's Icahnic move

Thursday, January 31, 2008

Seems like Motorola has bowed to investor Carl Icahn. The company announced today that it will go for a "structural and strategic realignment" to separate its loss-making mobile division from the rest of the company. This includes possibilities of a spin-off or even a sale. This is something that Mr.Icahn, a 3.3% Motorola stake-holder, has been advocating for sometime now.

You can read some opinions and analysis in this reuters report. While this is not necessarily surprising in the wake of Mr.Icahn's position, I do wish to note a few points -
  • The largest US handset maker may potentially get acquired by an Asian/European competitor. This can weaken US's position in the wireless/telecommunications industry. Further, its position as the US market leader is an extremely attractive proposition to other vendors.
  • In the case of an acquisition by a non-US company, I can see QCOM's position strengthen internally. As a handset vendor, Motorola had vested interests in keeping QCOM at bay in the wireless standards. If the company ceases to exist in this space, then QCOM will likely get unconditional backing from the US wireless industry and perhaps the government as well.
  • With Nokia unlikely to be a buyer, it is further good news for QCOM in terms of increasing its market share. If it is any indication, the recent announcement from Motorola that it will go with QCOM 3G chipsets may be a deliberate positioning effort to bring in more suitors. LG or Samsung will perhaps be most ideal for QCOM's fortunes.
  • Chinese vendors who are having a growing clout in the industry, may post heavy bids to emerge as bigger forces effectively redefining the industry's geopolitical alignment.
  • I can also think of dark horses like Google as buyers.
  • While a spin-off itself may be good for the other two profit-making ventures, it will also enable the new entity to focus on winning back some market share.
I will key in further thoughts as they come to my mind. But it will be an interesting next few months for the wireless industry.

Posted by Vijay Nagarajan at 9:00 PM  


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