'Improved Flexibility'

The mobile-devices business designs, manufactures and sells handsets and accessories, along with what the company described as "integrated software solutions." It also licenses its intellectual property.

The broadband group includes the enterprise mobility, government and public safety, and home and networks businesses, which manufacture, design and service voice and data networks. It provides IP video solutions, wireless cellular and broadband infrastructure , cable receivers, and related equipment for homes and businesses.

Motorola CEO Greg Brown said the split into two publicly traded companies follows a decision in January to evaluate the structural and strategic realignment of the company's businesses.

He added that the two companies "will provide improved flexibility, more tailored capital structures, and increased management focus," as well as more "targeted investment opportunities for our shareholders." A search has begun for a CEO for the mobile-devices company.

Pressure From Icahn

Avi Greengart, an analyst with industry research firm Current Analysis, said in the short term, "there will probably be little impact" on the market. But in the longer run, he said, it might end up splitting the sales team and dividing previously unified offerings of infrastructure and handsets at a time when competitors such as Research in Motion are providing unified solutions.

A two-company solution was urged by billionaire Carl Icahn, the company's second-largest shareholder, who has been engaged in a proxy battle with the company. He is pushing a slate of directors and suing the company to release documents related to its mobile-devices business. Icahn has said that the mobile devices business is undervalued and needs new management. Motorola's stock, which had dropped about 45 percent in the past year, rose about 4 percent in early trading Wednesday.

Motorola had $36.6 billion in sales last year, but it has been battling a deteriorating market position as it dropped to third. Sales in 2007 for the mobile-devices business were down 33 percent from the previous year, for an overall operating loss of $1.2 billion.

Observers have noted that the company had been steering away from its earlier direction of going after emerging markets with low-priced handsets. Its RAZR line had a high margin when it first came out, but then was offered free in some package deals. Critics said Motorola was relying too much on the sales of a very few handset models, and needed to broaden its portfolio.