Motorola Reconfigures

Two months after adding “mobility” to the name of its cable group, Motorola last week folded its cellular-phone infrastructure unit into the former Connected Home Solutions division.

The move, disclosed in a Securities and Exchange Commission filing, creates an operating unit focused on cable and wireless operators that's more than double the size of Connected Home Solutions.

Dan Moloney remains president of the Horsham, Pa.-based group, which Motorola renamed Home and Networks Mobility in May. As a combined entity in 2006, it would have had $9.2 billion in revenue, compared with $3.3 billion for Connected Home Solutions alone.

In addition to digital set-tops, video-headend equipment and voice and broadband products, Home and Networks Mobility now includes Motorola's public-networks business. That group, which sells equipment to cellular-phone providers including Sprint Nextel, Verizon Wireless and Clearwire, was formerly included in the Networks and Enterprise segment.

The Networks and Enterprise segment, formed in March 2006, merged the cellular networks and two-way-radio businesses. On a conference call with analysts, Motorola president and chief operating officer Greg Brown said the two groups had become more efficient.

“With both of those organizations now leaner, and given the market trends and complementary strategies, it makes sense then to take the next step and bring together our cable, wireless and wireline businesses under one roof,” he said.

As part of the reorganization, Motorola established the Enterprise Mobility Solutions group, which includes the public-safety radio business and enterprise wireless businesses. The group also will subsume the recently acquired Good Technology, a developer of mobile-communications software, which was previously part of the Mobile Devices group.

The company said no additional layoffs would result from last week's reorganization. Motorola already had announced plans to eliminate about 7,500 jobs, or 11% of its work force, this year.

As a whole, Motorola has been suffering in recent quarters because of weakness in the mobile-handset business, the largest of its three groups, with $28.4 billion in sales last year. Last week the Schaumburg, Ill.-based company reported sales of $8.7 billion for the quarter ended June 30 — $700 million below its previous expectations — and posted a net loss of $28 million.

Motorola's cable group continued to be a relatively peppy performer: The Connected Home business “delivered another exceptional quarter,” Brown said on the earnings call. The unit put up sales of $1.1 billion, up 40% from the same quarter last year and up 8% over the first quarter of 2007.

However, Brown added, the cable business in the second half of the year will be “softer” than the first half because of the Federal Communications Commission's integrated set-top ban. “Operating margin will be down a bit, but we still expect it to improve for the full year,” he said.

Analysts said Motorola's restructuring didn't exactly come out of left field. “For a company under a lot of pressure, it shouldn't be a surprise that they're doing this,” Pali Research analyst Walt Piecyk said.

Motorola's overall margins will continue to be driven by the handset unit, Piecyk noted — and the reorganization “doesn't fix that issue.”

But, he added: “They're thinking a reorganization will give them a fresh approach to the business.”