Standard & Poor’s Ratings Services said it would lift its ratings on Motorola Inc. back to investment-grade territory early next year when the telecom-equipment maker splits into two.
Last month, Motorola set Jan. 4 as the date it will separate into two companies. The current company will change its name to Motorola Solutions and hold onto the business mobile and networks divisions, which sells such products as police radios and barcode scanners. It will spin off a new company consisting of its consumer-focused handset business.
S&P said it will raise the rating on the new Motorola Solutions company on that date to BBB, a two-notch bump from its current level at the highest rung of junk status.
The agency said the coming upgrade, which will include a stable outlook, reflects how the new Motorola’s enterprise operations have a stable, recurring business model. The agency also expects Motorola to reduce debt in up to two years.
The new Motorola has a low-risk profile, according to S&P, which cited stability in its markets, the high priority of its public safety solutions and the high barriers to entry that protect its competitive position.
However, it noted some risks, including weak growth prospects in many markets, pressure on municipal government budgets and technological evolution.
S&P had put the company on watch for upgrade in September because of the planned breakup.
In October, the Motorola in its current form reported its third-quarter profit soared as it sped the release of new smartphones using Google Inc.’s Android software. Motorola has bet heavily that its lineup of Android devices would rejuvenate its flagging mobile devices business — a move that is starting to pay off.
Motorola shares were recently trading up 2 cents, $8.48.
