Investors betting heavier on Motorola Solutions

By Associated Press
Posted Dec. 17, 2010 at 11:49 a.m.

The stock market on Friday started working out the relative values of the two companies Motorola Inc. will break into on Jan. 4, as their respective shares started trading on a “when-issued” basis.

In opening trading on the New York Stock Exchange, the market implied that Motorola Mobility Holdings Inc., which will make cell phones and cable set-top boxes, would be worth $8.1 billion, while Motorola Solutions Inc., which will make things like police radios and bar-code scanners, would be worth $12.4 billion.

But sentiment shifted quickly toward Motorola Solutions, and by midday the valuation was $7.35 billion for Mobility and $13.5 billion for Solutions. Mobility shares were at $24.99 and Solutions shares were at $40.17.

In effect, investors are figuring out how to apportion Motorola Inc.’s $20.8 billion market cap between the two parts. Shares of the Schaumburg company were down 3 cents at $8.85 in midday trading. They hit a 52-week high of $8.95 on Thursday.

“When issued” trades are settled after the Jan. 4 breakup, when Motorola shareholders of record on Dec. 21 will receive one share of Motorola Mobility for every eight shares they hold. Motorola shares will then go through a 1-for-7 reverse split and become Motorola Solutions shares.

The businesses that will become Motorola Mobility had $2.9 billion in sales in the most recent quarter, compared with $1.9 billion for Motorola Solutions. However, the $321 million in operating earnings at Solutions dwarfed the $3 million that Mobility made.

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