Motorola Set-Top Box Auction Slows

NEW YORK (Reuters) – U.S. mobile phone maker Motorola Inc (MOT.N) is revisiting its plan to reorganize its business units and as a result, the auction of its home and networks division has slowed down, a source familiar with the matter said on Thursday.

Motorola’s board will meet at the end of January to decide whether to sell the networking division or spin it off along with its mobile handset business as one entity, the source said.

Motorola has previously said it would split its handset unit from its other divisions, hoping to turn it around.

Several private equity firms put in initial bids in December for the networking division, which houses Motorola’s set-top box unit, sources earlier told Reuters.

First-round expressions of interest came from private equity firms including Bain Capital, TPG Capital, Blackstone Group LP (BX.N), KKR, Silver Lake Partners and Boston-based THL partners, sources said at the time.

But the next round of bids are only due on Feb. 18 and even that date could slip, indicating the process is going very slowly, another source said. At least one large private equity firm that put in a first-round bid has dropped out of the process, another source said.

Private equity firms that bid have been asked to team up with strategic bidders — meaning companies in the same industry — for the next round, two sources said.

Telecommunications companies interested in the unit include Arris Group Inc (ARRS.O) and China’s Huawei Technologies Co Ltd [HWT.UL], the sources said.

The bidders have been asked to reconfirm their offers by next week, one of the sources said.

The sources spoke on condition of anonymity because the auction is being conducted privately.

Motorola spokeswoman Jennifer Erickson declined to comment on the auction but said that the company’s publicly stated plan is to separate the mobile handsets unit from the rest of the company, which includes the home and networks business and the enterprise mobility unit.

Representatives for Arris and Huawei did not immediately return calls or emails seeking comment.

PHONE SALES

Motorola has said that the timing of any mobile handsets unit spin-off would depend on factors such as market conditions and improvements in the performance of the unit.

The mobile phone unit has not had a hit device since the Razr, although the Droid smartphone has generated good buzz. The company said last week that consumers have given the Droid, which is based on Google’s (GOOG.O) Android software, a good reception.

Motorola has not given specific sales numbers for the phone, but analysts have high expectations as Verizon Wireless has been heavily promoting the device in its biggest marketing campaign ever for a single device.

One reason why Motorola may hold on to its set-top box business is because the initial bids came in between $3 billion and $4 billion, below what the company was expecting, according to the Wall Street Journal, which first reported the news.

Last month, a source told Reuters that private equity firms were likely to bid at a multiple of around six to seven times the unit’s earnings before interest, taxes, depreciation and amortization (EBITDA), valuing it at no more than $4 billion.

Shares of Motorola closed Thursday at $7.71, up 1.4 percent, on the New York Stock Exchange.

By Anupreeta Das and Megan Davies
(Additional reporting by Sinead Carew; editing by Andre Grenon and Steve Orlofsky)