Motorola is to put US$3.5 billion of cash into its Motorola Mobility business ahead of its spin-off, a filing made to the US Securities and Exchange Commission has revealed, although it was noted that the amount is “only an estimate at this time”. The document said that the sum is “expected to fund [Mobility] at the time of the separation”, providing a safety net for the loss-making business in its early period of trading.  Bloomberg reported that the money will be “used to operate and expand the business” and to “probably help pay for acquisitions” – purchases are likely to be of small businesses to bolster Mobility’s software capabilities. The SEC filing also confirmed that the unit will not pay dividends to shareholders “for the foreseeable future”, as future earnings will be retained to finance the business. The spin-off is still expected to be completed early in 2011.

In line with standard practices, Motorola outlined the threats posed to the business, which also provided some interesting detail on its activities. Along with the reminder that the unit “had substantial operating losses as a result of the financial performance of our Mobile Devices business” for the last three years, it was noted that 17 percent of the Mobility unit’s revenue came from Verizon Communications, including Verizon Wireless, while 13 percent was from rival US operator Sprint Nextel. North America accounted for 63 percent of sales, followed by Latin America, with 16 percent, and China was also identified as a key market. It was noted that Motorola Mobility has “several large customers, the loss of one or more of which could have a material adverse effect on us” – in the handset market it does not have long-term exclusivity arrangements with customers or commitments to purchase guaranteed volumes, meaning “our customers can cancel orders or contracts with us with little, if any, notice.” In its most recent results, Motorola noted a decline in revenue for the handsets business, although its shipment volumes were better than analyst expectations.