Motorola Inc. is working on plans to buy back most of its debt and give up to $4 billion to a spin-off company focused exclusively on cellphones, smartphones and other mobile devices, according to The Wall Street Journal.
The company previously announced plans to split in early 2008, under pressure from investors. When the spin-off occurs next year, the board has pushed that the new cellphone company be free of most liabilities.
According to the report, Motorola’s existing devices unit has lost about $5 billion and 15,000 employees have been laid off since 2007. Most of Motorola’s loss has been triggered by a devastating decline in cellphone sales amid increasing competition from newer rivals in the handset space.
The latest plan calls for Motorola to spin out its cellphone division and profitable cable set-top box business into a new company called Motorola Mobility, The Wall Street Journal reports. By freeing the new company of debt and infusing it with cash flow, the board hopes it will make strategic acquisitions and develop the next Razr-like hit.
Meanwhile, Motorola’s remaining assets will be lumped into Motorola Solutions, which will carry the remainder of any cash along with the burden of all pension obligations and most other liabilities. The Motorola Solutions business brought in $11.1 billion in revenues in the first quarter.
Motorola currently has $3.9 billion in debt and $8.48 billion in cash and investments, according to the report.