Motorola's prowess once extended from state-of-the-art semiconductor fabs to pioneering wireless communications systems including the cellphone. But a maturing communications industry has long since moved away from such vertical integration, adopting a more nimble horizontal structure.

It's a long and often painful shift for such giants. AT&T was an early mover, though it too took decades to hive off its carrier, system and silicon businesses that are now parts of a diverse set of companies from Alcatel-Lucent to Avaya to LSI Corp. and more.

For its part, Motorola's semiconductor business struggled for years as part of the slow moving vertically integrated giant, eventually spun out as Freescale Semiconductor. Next year, the remaining systems businesses plan one final split.

The group that sold the wireless infrastructure business to NSN will spin out as Motorola Solutions, focused on public and private networking businesses. The remaining piece, Motorola Home, will continue the cellular handset and cable TV businesses.

Motorola is far from dead. Indeed, the handset group recently reported better than expected results around its new focus on Google Android handsets in partnership with customers such as Verizon.

However, it will be interesting to see whether the slimmed down Motorola Home group or the still vertically integrated Samsung will lead the charge in Android smartphones and other digital consumer gear.

Motorola retains its broad patent portfolio as part of the deal, striking a cross licensing deal with NSN as part of the acquisition. "The IP is valuable to the remaining Motorola companies including the handset and connected home business," said Greg Brown, co-chief executive officer of Motorola.

Motorola had about 52,000 patents when it had its semiconductor operations. It is believed to have more than 30,000 patents since the Freescale spinout.

"We have been working on this deal for several months and there are no other [divestiture] deals I am working on now," said Brown.

It's not yet clear how Motorola will spend the $1.2 billion windfall. Brown said the deal should close by the end of the year. More financial details will be revealed before the two Motorola groups part ways in 2011.

The acquisition involves a group of about 7,500 Motorola employees that generated about $3.7 billion in revenues in 2009 in CDMA, GSM, LTE and WiMax. The deal includes R&D operations in China, Japan and the U.S.

With the acquisition, NSN will move "in North America from number five to number three and you can rest assured our ambitions do not end there," said Rajeev Suri, chief executive of NSN in a telephone conference with press.

NSN expects to gain relationships with more than 50 operators and to strengthen its position with China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone.

But Suri will have his hands full integrating the diverse Motorola operations and culture in his efforts to compete with giants Alcatel-Lucent and Ericsson.

Suri said NSN already has 175 customers in 3G and 15 in LTE, numbers Motorola will help expand in global scale with volumes that can help reduce costs. NSN currently plans no layoffs of Motorola staff, he said.

"This deal brings together two important Verizon suppliers; we look forward to our continuing work with Nokia Siemens Networks," said Richard J. Lynch, chief technology officer of Verizon in a press statement.

The full agreement between NSN and Motorola is available online.