Home / World Business
Wed, Oct 08, 2003 - Page 12 News List

Motorola's semiconductor business to be independent

AP , CHICAGO, ILLINOIS

Telecommunications-equipment maker Motorola Inc plans to spin off its semiconductor operations, its biggest money loser, as a separate, publicly traded company -- a change of course analysts said was long overdue.

"We believe that by creating two independent companies we will be able to better unlock the value of Motorola's existing businesses," Christopher Galvin, the outgoing chairman and chief executive of the Schaumburg-based company, announced on Monday.

The company is considering an initial public offering of a portion of its semiconductor business followed by a distribution of remaining shares to shareholders, subject to Motorola board approval and other conditions, Galvin said.

Motorola shares surged on the news, climbing by US$1.25 to a 52-week high of US$13.53 a share Monday afternoon on the New York Stock Exchange.

Analysts have long been calling for the unit -- which fell off the list of top 10 world chipmakers this year -- to be sold of spun off.

Motorola's worldwide semiconductor sales were US$4.8 billion last year, about 18 percent of the company's US$26.7 billion total sales.

"I have long questioned why they were in the business," said Morningstar analyst Todd Bernier, pointing out that Motorola's semiconductor division accounted for US$1.5 billion of Motorola's US$1.8 billion operating loss last year.

"It's a stronger company without the [semiconductor] division," he said.

The move follows Galvin's recent announcement that he was retiring, which was also met by a surge in stock price. And even though Galvin said he backed the move, analysts said it is contrary with his philosophy that the semiconductor division be under the same roof as the parent company, which his grandfather founded.

"It's not a coincidence that, in my opinion, he resigned and then a week later they announced they are spinning off the chip business," Bernier said.

Motorola executives said the move makes sense because the semiconductor business is much more cyclical -- something analysts have long argued.

David Devonshire, the com-pany's chief financial officer, said the separation also will improve relationships with customer "who may perceive a conflict with Motorola's other businesses."

Motorola spokeswoman Jennifer Weyrauch said the 23,000-employee semiconductor division is based in Austin, Texas, and there are no plans to move it.

Executives would not say when they hope to complete the spinoff or how much they would expect to raise in an IPO. Nor did they discuss how the decision would affect a search for Galvin's replacement.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top