Motorola (NYSE:MOT) recently announced that Nokia (NYSE:NOK) will acquire most of its wireless network equipment business for $1.2 billion in cash. In addition to Nokia, Motorola competes with Ericsson (PINK:ERIXF) and Huawei in this market.

According to the deal, Nokia will acquire Motorola’s assets related to theWiMax, CDMA, GSM and LTE wireless communication standards. However, Motorola will keep assets related to iDen, a “push-to-talk” technology that facilitates coast-to-coast walkie-talkie communication.

We have updated our Motorola model to reflect these changes and estimate that wireless network equipment sales now constitute around 1% of the $7.4 Trefis price estimate for Motorola’s stock. Our analysis follows below.

1.   Negative Revenue growth expected

Motorola’s wireless network business consisted of infrastructure equipment based on WiMax, CDMA, GSM, LTE and iDen technology.

Wireless network equipment revenues declined from $6.2 billion in 2005 to $4.1 billion in 2009. As wireless service providers deployed next-generation3G and 4G wireless networks, Motorola’s revenues from its relatively mature CDMA infrastructure equipment were dropping.  Though demand for Motorola’s GSM equipment remained steady, revenues suffered due to pricing pressures from Chinese competitors like Huawei.

On the other hand, Motorola’s Wimax equipment business did show revenues growth in recent years. Wimax and LTE are both 4G technologies, which are considered high-speed technologies. But LTE been gaining more traction than Wimax recently, as telecom providers like Verizon and AT&T invested in LTE for their networks.

The one wireless infrastructure business that Motorola kept, iDEN, is also the most marginal business. iDen-based walkie-talkies are used by  construction workers, security services and the like. Motorola’s main iDen customer wasSprint (NYSE:S), but the technology never found a large user base.

Sprint’s iDen  subscriber base declined from 17.6 million in 2006 to around 7 million in 2009, and Motorola’s iDen revenues suffered accordingly. Motorola’s iDen equipment sales totaled $400 million in 2009, according to the company. We expect iDen revenues to decline from $350 million in 2011 to $240 million by the end of the Trefis forecast period.

2.  Declining Gross Margins

The only obvious reason why Motorola decided not to sell iDen technology is that it was the most profitable business line in the company’s wireless networks division. Motorola’s gross iDen margins could increase in 2011, when the transaction is expected to close. In the long run we expect iDen margins to decline along with revenues.