Mobile giant Motorola is to split into two separate companies next year, one selling mobile handsets and the other broadband and network equipment to business, consumer and government customers.

In its latest financial report, Motorola reported that revenue from its mobile devices unit fell 38 per cent year on year, down from $7.8bn (£3.9bn) in the fourth quarter of 2006 to $4.8bn (£2.4bn) for the same period in 2007, precipitating a $388m (£194m) drop in operating profit.

Following the earnings announcement and under pressure from shareholders, Motorola launched a strategic review and announced it was examining a number of options for its mobile devices business.

But initial talks with potential buyers have not gone well, according to Gartner vice president Leif-Olof Wallin, who said it might take more time to whip up interest among firms outside the mobile handset industry.

“During this time, the handset unit will be under considerable stress, with lots of inward-looking activities taking time and focus away from products, sales and marketing which might further fuel a negative spiral. Competitors will probably gain the most during this period,” said Wallin.

The situation looks healthier for Motorola’s new Broadband and Mobility Solutions group. The enterprise mobility unit saw revenue grow 35 per cent in the fourth quarter, with operating profit at $451m (£225m).

The group will continue to provide emergency service radio systems, Symbol rugged mobile terminals, biometric platforms and wireless broadband networks to UK customers.