Motorola has confirmed that it intends to reorganize itself into two independent companies by the first quarter of 2011: the mobile handset business will be combined with the set-top box unit in preparation for a spin off into a publicly traded company.

The two businesses will be overseen by Sanjay Jha, one of Motorola's two co-chief executives. The company's other co-chief executive, Greg Brown, will head Motorola's wireless networking business and its enterprise radio systems operations.

The intention is to split the companies through a tax-free stock distribution to Motorola shareholders. The mobile handsets and home business will own the Motorola brand and will license it royalty-free to the enterprise and networking company.

"We believe this structure provides significant operational and strategic flexibility for both companies, positions them for future success, and enhances long-term shareholder value," David Dorman, Motorola's chairman, said in a statement.

The wireless networking business, which focuses on telecommunications products, would then likely be sold off, too. Depending on the level of interest, some analysts feel that the unit could fetch more than $1 billion. This would still leave Motorola with a profitable enterprise radio systems business, which accounted for $7 billion of the company's $22 billion in sales in 2009.

Motorola executives have been considering ways to differentiate the handset unit from competitors; one possibility was through combining it with its set-top box business, which delivers home networking and digital video services.

"The combination of mobile devices and our home business brings together two highly complementary and innovative organizations," Mr. Jha said in a statement on Thursday, February 11th. "Together, we will be best positioned to lead in the convergence of mobility, media, and the Internet."

The combined unit could fit into the "three screens" lifestyle envisioned by carriers like Bell Canada and Rogers Communications, where content is consumed on TV, computers, mobile phones.

Motorola had previously considered selling or spinning off its mobile handset business. However, this was delayed due to falling sales. One bright spot has been the positive reception of new handsets like the Droid, which has gained a following among Verizon Wireless customers south of the border.