Of the well known mobile phone handset makers in the industry, Motorola is certainly one of the big names. Motorola had huge success with its first generation RAZR phone in 2005. Since the introduction of the first RAZR, Motorola has been having a hard time gaining ground on the market leaders in the mobile handset market.

DailyTech reported in January 2008 that Motorola announced it was considering leaving the handset business after reporting a Q4 2007 loss of $1.2B and seeing its handset market share drop to only 23%. In February, DailyTech reported that Motorola was in a three-way tie for the next to bottom spot among handset makers with Samsung, Nokia and Sony/Ericsson for customer satisfaction.

Rather than simply sell off its mobile phone operations Motorola announced today that it wants to create two new stand-alone companies out of its current company arrangement. Motorola proposes to create a Mobile Devices business, which would design, manufacture and sell mobile handsets and accessories globally. This business would also license a portfolio of intellectual property.

The other business would be the Broadband & Mobility Solutions business that would include Motorola’s Enterprise Mobility, Government and Public Safety, and Home and Business Networks businesses. This business would make, design, integrate and service voice and data communications equipment and wireless broadband networks worldwide.

Motorola’s chief executive officer and president, Greg Brown, said in a statement, “Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors.”

“Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus – as well as more targeted investment opportunities for our shareholders.”

Brown went on to say, “Our priorities have not changed with today’s announcement. We remain committed to improving the performance of our Mobile Devices business by delivering compelling products that meet the needs of customers and consumers around the world.”

Motorola says that the creation of the two stand-alone businesses is expected to be completed as a tax-free distribution to Motorola shareholders. The deal is subject to further financial, tax and legal analysis and shareholders would end up holding shares of two independent publically traded companies. 

The transition is pending the implementation of inter-company agreements, filing of documents with the SEC and a ruling on the tax-free nature of the arrangement by the IRS.