GOOGLE MIGHT BE STRUGGLING with its own business, but the search giant has helped resuscitate at least one business: Motorola.
The one-time mobile standard bearer has tied its fortunes to Google's (ticker: GOOG) open-source mobile platform known as Android. Years after Motorola's (MOT) Razr lost its relevance, Android is helping the handset maker regain its edge.
Motorola launched its latest device, the Droid X last week. The smartphone is winning strong reviews and could be the primary beneficiary of Apple's (AAPL) iPhone 4 antenna issues, as well as the supply issues facing Taiwan-based HTC.
An earlier Droid model released last year has helped power Motorola's stock as shares are up 21% over the last 12 months, compared to 13% for the S&P 500.
Motorola, meanwhile, continues to hone its corporate focus. On Monday, the company announced it was selling its wireless infrastructure business to Nokia Siemens, the joint venture created by the two European telecom giants.
The deal is valued at $1.2 billion and frees Motorola from an aging business providing base stations to mobile carriers. Nokia Siemens was largely attracted to the unit's relationships with carriers including Verizon Wireless, according to Morgan Keegan analyst Tavis McCourt.
Investors are applauding the deal, sending Motorola shares up 3.5% to $7.76.
"Generally, I think it cleans up the story," McCourt tells Barrons.com.
Motorola now has two primary parts: One focuses on handsets and set-top television boxes, while a second unit concentrates on government and public safety.
Motorola is aiming to separate the businesses by the first quarter of 2011. By that point, McCourt sees a stock that could fetch as much as $12, if the handset momentum continues.
So far, Motorola's decision to use Google's open-source mobile operating system is paying off. Android has emerged as a credible alternative to Apple's iOS platform (See this weekend's Barron's cover story about Google "Looking Up," July 17).
We've recently touted the success of Android, while writing about other telecom players. (See Barron's Take, "Qualcomm: A Sound Investment," July 12).
Android has undoubtedly helped Motorola sales and it should continue to power the stock, as well.
Last week, Morgan Stanley turned bullish on the name, upgrading shares to Overweight from Underweight. In part, the firm thinks Motorola can benefit from continued supply problems at HTC, which has had trouble keeping its popular Incredible Android phone on store shelves.
Morgan Stanley estimates that Motorola could nearly double its market share of smartphones from 4% at the start of this year to 7% in 2012. (The firm sees Motorola capturing approximately 25% of the Android phone market by the fourth quarter of this year.)
It's been a long road back for Motorola, but the signals of success keep getting stronger.
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