Motorola, maker of the first cellular phone in 1983, is exploring the possibility of splitting itself into three listed companies and selling its home and networks mobility unit to repay debt.

Motorola has three major divisions, mobile devices, enterprise mobility, and home and networks mobility, all of which are struggling.

The once undisputed technology giant, which enabled Neil Armstrong's famous words: ''one small step for a man, one giant leap for mankind" to be communicated from the Moon on a Motorola radio, is in talks to sell its its most profitable division, home and networks mobility division, which makes television set-top boxes and networking gear.

Facing intense competition from Cisco System, Hewlett-Packard and others, Schaumburg, Illinois-based Motorola is seeking to sell its most profitable division, which could fetch $4 billion to $5 billion, The Wall Street Journal reported.

The set-top-box division, which accounts for about a third of revenue, was transformed into a performance-driven company in September 1999 after Motorola acquired the then No.1 cable TV equipment maker, General Instrument in an $11-billion stock swap deal.

The division had sales of $10.1 billion last year, and its net revenue of $2 billion in the third quarter was down 15.3 per cent from a year ago. Profit fell 24 per cent to $199 million, down 24.3 per cent from a year ago for the same quarter.

Two private-equity funds, TPG and Silver Lake Partners are said to have shown a keen interest in acquiring the division, although Motorola said it does not comment on rumours but added that it is committed to its long-term plan to split off its mobile-phone unit.

Other companies that could also be interested in parts of the division include South Korea's Samsung Electronics, China's Huawei Technologies, Sweden's Ericsson and Pace of the UK.

Motorola, which introduced the world's first two-way pager and first large-screen transistorised, cordless portable television set, has hired JPMorgan Chase Centerview Partners and Goldman Sachs to evaluate buyers for the set-top division.

Last year, current co-CEO Greg Brown had announced plans to split the phone unit from the rest of the company, in which Aurangabad-based Videocon was named as one of the possible buyers. (See: Videocon in talks to acquire Motorola's handset business)

Motorola has been under pressure from investor activist Carl Icahn to spin off the loss-making division, which also includes a business unit that sells walkie-talkies to businesses and government agencies, a product the company first introduced during WW II, as the "Handie-Talkie."

Sanjay Jha, 45, a 14-year Qualcomm veteran, was inducted in Motorola in August 2008 to run its ailing wireless-handset division as a prelude to the planned spin-off of the unit in mid-2009. (See: Motorola poaches Qualcomm CFO to head loss-making handset division)

Jha faced a daunting task in trying to turn around Motorola's handset division and help it recover from arguably its worst crisis ever. The company has fallen to third place globally - barely fending off No 4 LG Electronics of Korea - and seen its share of the market fall to 9.5 per cent from nearly 24 per cent two years ago.

The unit lost more than $1.9 billion since the start of last year as customers fled to competitors such as Nokia and Apple. Even the temporary respite offered by the Motorola RazR has proved to be just that – temporary.

In December 2008, Motorola co-CEOs Greg Brown and Jha had decided to reduce their base salaries by 25 per cent from 2009, since many employees globally would not get salary increases from 2009  and witness a freeze in pension plans as the company struggles to cut costs and remain competitive. (See: Motorola CEOs take pay cuts; relinquish bonus)

The firm had cut 6,700 jobs in 2008 and in January 2009, it said it would cut 4,000 jobs, roughly 6 per cent of its workforce, in the face of the economic downturn and waning demand.

Motorola said the move brought planned cost savings in 2009 to $1.5 billion. That figure includes $700 million of new savings on top of a previously announced plan to cut $800 million in expenses.

Motorola has seen its flagship wireless device business come under attack by a combination of the economic slowdown as well as blistering competition from rivals.

Overall sales of cell phones have been slowing while smart-phone devices such as the BlackBerry and iPhone take market share. By contrast, Motorola has lacked a must-have product since the introduction of the popular RAZR five years ago.

But in July 2009, the biggest mobile-phone maker in the US, recovered dramatically in the second quarter, posting a modest $26 million profit, signalling the worst could be over for it after several quarterly losses. (See: Motorola bounces back with $26 million Q2 profit)

Analysts attribute much of the turnaround to the bold cost cutting initiated by both Brown and Jha.

Motorola had said at the time that it wanted to take advantage of the current popularity of smart phones which, although represents a small percentage of global handset sales, account for high profit margins.

This month, the company introduced two Android phones based on Google's Android operating system by launching the long-awaited smartphones - the Droid and the Cliq, with the Droid, though turning out to be a winner for Motorola, has not exactly been an iPhone killer.

Motorola tied up with Verizon Wireless, a joint venture between Vodafone Plc and Verizon Communications to sell the Droid with Verizon backing sales with one of its largest marketing campaigns ever.

It made a similar marketing deal with T-Mobile for Cliq, which is another Android phone that makes social-networking prominent in its interface.

Analysts stmates of the Droid's first-week sales between 100,000 to 400,000 handsets, which according to some is meagre considering that the iPhone 3GS, launched in June in eight countries sold a whopping 1 million.Analysts, however, seem hard on Motorola since the Droid was introduced only in the US market while the iPhone 3GS was launched in eight countries.