Carl Icahn just can’t help himself. Rather than sit patiently and wait for his large investment in Motorola (NYSE: MOT) to ripen, he keeps pulling out his check book to buy another large block of the telecom giant’s stock.

In late August, he bought another $111 million worth of stock and now owns more than $1.8 billion or 10% of the entire company. He started buying when shares were on their way down to around $3 in early 2009, and he’s been buying stock even as it has more than doubled off of those lows. Let’s take a look at why he thinks Motorola is still nice at twice the price.

A coming split
Icahn started buying up stock in 2007 when he realized that the company looked undervalued on a sum-of-the-parts basis. Investors were giving little credit to various divisions as they had a hard time figuring out how to place a price tag on them. Icahn knew — and suggested — that the company be broken up. After several rounds of management changes, the Board of Directors finally agreed with Icahn and began to take steps to create two separate companies in the first quarter of 2011.

One division will focus on the company’s enterprise-focused products, while the other focuses on smart phones, tablet computers and TV set-top boxes. (Motorola’s wireless network assets are set to be sold to a joint venture run by Nokia (NYSE: NOK) and Siemens (NYSE: SI) later this year). The ostensible reason for the break-up, according to management, is that each division will be run with much more autonomy. But Icahn’s pressure is likely the real catalyst. The question is, will be Motorola be worth more once it’s run separately, as Icahn suggests?

Regaining lost luster
Just a half-decade ago, Motorola was a leader in cell phones with its hot-selling MOTO and RAZR phones. Strong market share in this division helped Motorola post banner results in 2006. Sales rose a heady +22%, operating margins hit nearly 10% and the company earned more than $1 a share. Since then, that cell phone division has lost its mojo, dragging down the company’s results. Company-wide sales fell -15% in 2007, another -18% in 2008 and a stunning -27% in 2009. Part of the shortfall was due to a slowdown in demand in other divisions as well.

Management, perhaps at Icahn’s behest, realized that a rebound in mobile phone sales was crucial, but they remained more focused on profits than market share. That was a wise move. After several years of losses, the mobile handset division is once again nicely profitable, thanks to a focus on expensive Android-based phones known as Droids. The company now gets more than $200 for every phone it sells, nearly double the take it had a few years ago.

Motorola’s market share may be smaller, but that’s only because it is quickly abandoning the low end of the market. The timing could not be better, as that mobile division, soon to be spun out, is now worth plenty more than it was just a few years ago. It also helps that Motorola’s other divisions are also finally starting to show rising sales. Overall sales stabilized in the most recent quarter, should be up +3% to +4% in the current quarter, and closer to +7% or 8% in the December quarter, when compared to a year ago. I’ll say it again, the timing for a separation of the two major divisions at Motorola could not be better.

What’s it worth?
With improving prospects, what are the two divisions worth? Well, every analyst has their own way of valuing the company, but all seem to agree that the combined entity is worth around $9 or $10 a share. For example, FBN Research notes that profitable companies focused on mobile handsets are worth about 0.8 times sales, on an enterprise value-to-sales basis, or $9 in this case. Others back out the company’s $5 billion net cash balance and look to operating earnings as a guide. Assuming Motorola is worth about 15 times its projected 2011 operating income, and then adding back that cash balance, leads to a target of around $10 a share.

Analysts at Citigroup split the difference between two metrics. They think shares are worth $9.50 on a price/sales basis, and $10.50 on an enterprise/sales basis, and thus have a $10 price target. That works out to be about +25% upside from current levels.

Action to Take –> Back when Motorola was down below $4, Icahn’s buying looked quite prescient. But with fairly limited upside from current levels according to most analysts, Icahn’s continued purchases look somewhat curious. He may well think these analysts are being too conservative, as they had been during the past few years. And he may be counting on an eventual improvement in sentiment toward tech stocks, or a very robust rebound in tech spending, which few anticipate right now.

So it looks like Motorola holds appeal if you keep your goals modest. This stock would be notably inexpensive if it falls down toward the $6 mark where it almost touched early this year. Conversely, it looks like any move towards the $10 mark may signal a time to take profits.