Motorola gains on Sprint-Nextel deal

Motorola was among the shareholders that reaped the benefits of Sprint acquisition of Nextel, gaining 69.3 million shares of the new company and $46.3 million in cash from the deal, according to financial reports Motorola filed with the FCC.

The transaction will yield Motorola a $780 million after-tax gain in its third quarter report from the sale of about 46% of that stock and the extra cash. Motorola, however, has agreed to hold onto 37.6 million of its shares until the end of 2006. At today’s trading price, those remaining shares are worth another $991 million.

The money adds to Motorola’s growing cash reserves, which before the Sprint-Nextel deal approximated $7.5 billion. Speaking at a news conference in Bangalore, India, CEO Ed Zander said that despite the windfall and recent savings Motorola will not increase dividends, which Motorola set at 4 cents per share in July. Instead Zander said Motorola would continue its plan to increases shareholder value by buying back outstanding stock.

Motorola was one of the original top investors in Nextel, using the carrier as the commercial driver for its proprietary iDEN radio technology. As Nextel grew, Motorola’s stake in the operator fell. As recently as 2003, Motorola had an 11% stake in the carrier, but it continued to sell off shares. After Sprint’s acquisition, Motorola stake in the new carrier fell to 4.6% of all shares outstanding before any stock sale.

Any one-time gain Motorola sees from the deal will probably be offset by the hit its iDEN infrastructure, and handset units will take. While Sprint Nextel said it will continue to run its CDMA and iDEN networks separately, Sprint said it will evolve its 3G networks down the CDMA path.