Icahn raises his Motorola stake to 10.4%

Billionaire investor Carl Icahn has increased his holding in Motorola Inc. to about 10.4%, according to documents the company filed with the Securities and Exchange Commission.

According to the filing, Icahn spent $86.2 million on 11.5 million shares of Motorola this week. Icahn had reported Aug. 3 that he had raised his stake to 9.99% since May 7, when he held 8.75% of Motorola’s shares.

Motorola is planning to split in two in the first quarter of next year, separating its cellphone and set-top-box business from its enterprise mobility business. Last month the company said it was selling its network equipment business.

Pacific Crest analyst James Faucette said Icahn probably expects the handset business to fetch a higher valuation once the company is split in two.

“The thesis for him and a lot of other people is if you’re able to separate the businesses, the stock will be worth more than it is today,” Faucette said.

Shares in Motorola closed up 18 cents at $7.68.

“With Motorola shares at about $7.50, a lot of value-oriented investors feel that the handset business is being valued at somewhere between zero and $1 billion,” Faucette said.

Given that Motorola is expected to sell more new phone models in coming months, Faucette said, the valuation seems low to some investors, especially when compared with Research in Motion Ltd., which has a market capitalization of about $26 billion.

But Faucette noted that it could be hard for Motorola to sustain a strong handset business over the long term because of increasingly tough competition in that market.

“Could the handset business be worth more if their new products coming out this fall do well? Absolutely, but it may not in the long run be that much more valuable,” Faucette said.

Motorola phones use Google Inc.’s Android software, which helps the company compete with rivals such as Apple Inc.’s iPhone and Research in Motion’s BlackBerry.