March 26, 2008 11:27 AM PDT

Is Motorola putting lipstick on a pig?

Posted by Marguerite Reardon

Motorola said Wednesday it plans to split off its handset business, but the move might just be a last attempt to pretty up the failing business unit to make it more attractive to potential buyers.

Since Motorola said in January that it was considering "options" for its handset business, there's been speculation that the company was preparing to sell it to a third party.

But word on the Street is that the company couldn't find a buyer. After all, Motorola is trying to unload the business for a reason. The company currently has no hit products, and its market share has been declining rapidly. Besides, potential buyers may look at what happened to BenQ when it bought Siemens' handset business in 2005. A year later, BenQ Mobile, which had been set up to handle the brand business, went bankrupt and with it went the rest of Siemens' handset division.

So what's the best way to move merchandise when it isn't selling? You could lower the price. Or you could pretty up and repackage what you've got. That might be just what Motorola is trying to do. It reminds me of those HGTV shows that tell you what you need to do to sell your house. The first thing they tell people is to remove all the excess crap they have lying around the house, pictures, kids' toys, anything that could distract a potential buyer.

So by separating the handset business from the rest of the company, Motorola may be trying to get potential buyers to focus exclusively on the good things the handset business has to offer without being distracted by the clutter of the other Motorola business units.

In essence, Motorola today is simply a brand. It's unclear what will happen to that brand after the company is divided into separate entities next year. General consensus among experts is that the Motorola brand will have to go with the handset business. And if it does, that may make the business a little bit more attractive to companies that don't have the same cache.

Chinese manufacturers, such as Inventec, Amoi Electronics, Huawei Technologies, and ZTE could benefit from the use of Motorola's brand name. These companies sell a lot of handsets in China, but they are not well known outside their country. Still, they are trying to address the developing markets, and having the Motorola products and brand could help them. Think about how Lenovo used the ThinkPad name after it bought the unit from IBM.

A marketing representative from ZTE told Reuters in February at a conference in Barcelona that the two companies have been talking.

So maybe splitting the company is really Motorola's way of prettying up the pig for a sale.