NEW YORK (Reuters) - Wall Street cheered Motorola’s separation into two companies, sending both their share prices higher on their first official day of trading on Tuesday.
The spinoff of the cellphone division, Motorola Mobility, was decisive action for a company that invented the cellphone, but was left in the dust by Apple Inc and Research In Motion in recent years.
After years of losing market share, the 82-year-old Illinois-based company returned to prominence by relying on Google’s Android mobile software for new generations of smartphones.
The company’s cellphone unit turned a profit for the first time in three years in the third quarter, largely because of sales of Motorola’s Droid phones at Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group Plc.
Now that Verizon is expected to start selling Apple’s iPhone this year, sales of Motorola phones could fall more than expected at Verizon, JPMorgan said in a research note.
The worst case scenario is for the loss to keep the company from breaking even this year, the note said.
Motorola Mobility Chief Executive Sanjay Jha brushed off the idea that Droid phones would fall by the wayside at Verizon, the top U.S. mobile operator.
“At Verizon, we will compete for our share,” Jha said on Tuesday at the New York Stock Exchange, where he rang the opening bell. “I believe that Droid economically is an important franchise for them.”
Shares of Motorola Mobility, which includes the smartphone and TV set-top business, closed 9.5 percent higher at $33.12.
Shares of Motorola Solutions Inc, which targets businesses with products like barcode scanners, closed up $2.46, or 7.6 percent, at $39.77.
Investors including billionaire Carl Icahn long have wanted Motorola to break itself up because it would offer a clearer choice between Mobility’s fast-growing, but volatile business and Solutions’ steadier, slower growth.
“The communication of our story to investors will be much simpler,” Jha said.
Jha expects his company to persevere in the mobile market with its new smartphones, a tablet and revenue growth from markets in China and Latin America.
“When you aggregate all that, that offsets some competitive dynamic that you will see in the first quarter,” Jha said, echoing the oblique references to Apple’s iPhone that he made late last year.
Some analysts, like Susquehanna Financial Group’s Jeffrey Fidacaro, were enthusiastic about Mobility’s dependence on Google’s Android operating system. It differentiates the company from rivals Samsung Electronics and HTC Corp, which support Android in addition to other software.
“Motorola Mobility is one of the few pure plays on the momentum on Android,” Fidacaro said.
Fidacaro, who rated Motorola Mobility stock a “buy,” estimated shares would reach $35 this year.
For Solutions, Fidacaro has a neutral rating and price target of $39. He expects the company to repay shareholders with a dividend in 2012 and possibly a share buyback after that. (Reporting by Liana B. Baker. Editing by Lisa Von Ahn, Dave Zimmerman and Robert MacMillan)