The Schaumburg, Ill., company has long sought the separation of its mobile devices business, but in the last few weeks shifted its existing plans. Motorola will now group together the mobile devices unit with the home division, which includes television set-top boxes, placing them under co-Chief Executive Sanjay Jha. Together, the divisions accounted for roughly half of the company's $22 billion in sales last year.
Fellow co-CEO Greg Brown would oversee the enterprise mobility and networks businesses.
The new plan represents a "cleaner and more compelling configuration for our shareholders and our customers," Brown said in an interview with Dow Jones Newswires.
"We are firmly committed to this," Jha said.
Jha, meanwhile, talked up the potential business that comes from creating products that can address both the home entertainment and mobile device interests. He added that the telcos and cable companies that buy Motorola set-tops view the move positively.
"There's is a new opportunity to market our new converged devices," he said during a conference call.
As recently as late January, when Motorola reported its fourth-quarter results, executives stuck to the original plan. The last-minute change was reported by The Wall Street Journal on Wednesday.
Investors, including billionaire activist shareholder Carl Icahn, have long pushed for a break-up of Motorola, because there are few natural connections between the various divisions. Further shake-ups may be in store; the Wall Street Journal said the wireless network equipment business may be auctioned off.
""What they do in the next six months would either validate these plans or cause a train wreck. ... If they screw up, if they have a bad piece of hardware that doesn't ship in volume, if they get beat up by the iPhone or something else, I bet they'll have to take some other direction," said Ken Dulaney, an analyst at Gartner.
The separation comes as the company looks to turn around its various flagging units. The higher profile mobile devices unit has shown some signs of life with the success of its Droid smartphone, which benefited from a heavy push by Verizon Wireless. The unit, though, remains under pressure as it changes its focus to a more profitable segment of the cellphone market, but still faces competitive pressure from the likes of Apple Inc.'s (AAPL) iPhone. Jha said late last month that he expects the unit to return to profitability by the fourth quarter.
"They're doing well on their smartphone strategy, and there remains a lot of opportunity there," said Matthew Thornton, an analyst at Avian Securities LLC.
The mobile-phone business had sales around $7 billion in 2009. The home division had sales of nearly $4 billion.
The various other businesses continue to see declines as a result of weakened consumer and government spending. Customers have held back spending on entertainment, keeping sales of new set-top boxes in check. Local governments, many of which are facing budget deficits, are less inclined to invest in new public radio systems. The networks business, meanwhile, suffers from lower demand from legacy equipment as the unit looks to growth in fourth-generation, or 4G, wireless technology.
Jha acknowledged that the mobile devices business, which has seen the most dramatic drop-off of the divisions, has weighed on the rest of the company.
"We have been at times a drain on resources on other business, and we've reduced shareholder value," he said.
The break-up will occur as a tax-free dividend of shares in a new company to Motorola shareholders. The enteprise mobility and networks business will assume the debt, which will be $3.3 billion by early next year.
The two companies will share the Motorola name. Jha's company will own the brand, and license it out for use to Brown's business. Brown said both companies would end up with "a good bedrock of [intellectual property rights]."
Motorola shares rose 3.9% to $6.91 in after-hours trading.
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