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Spin-offs Case Study

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Case Title:

Motorola's Spin-off Decision: What's the Spin?

Publication Year : 2009

Authors: Sai Kumar Varala, Vasanthi Vara

Industry: Engineering, Electrical and Electronics

Region:US

Case Code: SPN0006

Teaching Note: Available

Structured Assignment: Available

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Abstract:
Lucent from AT&T, Delphi from GM, BenQ from Acer, Novelis from Alcan and many others are examples of companies spinning off a major part of their business into a new business. Spin-offs are increasingly being used by companies as a method of restructuring in order to increase shareholder value and to improve focus on their core business. In the wake of these developments, Motorola, the third largest mobile phone manufacturer announced the spin-off of its handset business. This case study sheds light on the role played by spin-offs in improving the performance of a company. It also focuses on circumstances which led Motorola to consider the spin-off decision. What are the possible reasons for the spin-off announcement? What impact does it have on Motorola? Will Motorola’s handset business be able to survive without the Motorola brand name?

Pedagogical Objectives:

  • To analyse the reasons underlying a spin-off decision, when does it make sense to spin-off one of the existing businesses, what kind of business (a business doing well or a business doing badly) should be spun-off, etc.
  • To understand and debate on the implications of a spin-off for the parent company’s bottom line and the consequent structural changes warranted
  • To debate on the pros and cons of Motorola’s decision to spin-off, what can it expect from this spin-off, who would be the beneficiaries, etc.

Keywords : Motorola, Spin-off, Divestiture, Mobile phone, Handset business, Brand, Branding, Brand Image, Moto Razr, Edward Zander, Carl Icahn, Culture, Product development

Contents : 
The History of Spin-offs: Logic and Performance
Boost in P/E Multiples Created by Restructuring
Higher Return to Shareholders through Spin-offs
Enron’s Accounting Scandal
Creating a Winning Spin-off
Motorola’s Handset Business Spin-off: Sound Business Sense or an Organisational Nicety?
Market Share of Top Five Mobile Phone Vendors (2008)
Motorola’s Fall in the Market Share

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