- The Washington Times - Monday, October 6, 2003

CHICAGO (AP) — 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, Ill.-based company, announced yesterday.

The telecommunications-equipment maker 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, Mr. Galvin said.

Motorola shares surged on the news yesterday, climbing $1.22 to close at $13.50 a share 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 or spun off. Motorola’s worldwide semiconductor sales were $4.8 billion in 2002, about 18 percent of the company’s $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 $1.5 billion of Motorola’s $1.8 billion operating loss in 2002. “It’s a stronger company without the [semiconductor] division.”

The move also follows Mr. Galvin’s recent announcement that he was retiring — which was also met by a surge in stock price.

And even though Mr. Galvin said he supported the move, analysts said it is contrary to 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,” Mr. 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 company’s chief financial officer, said the separation also will improve relationships with customers “who may perceive a conflict with Motorola’s other businesses.”

Analysts agreed.

Matt Hoffman of SoundView Technology Corp. said that because Motorola provides semiconductors to its own cell phones, “There’s always a perception that the external guys will have to stand at the end of the line, that [Motorola] had a home-field advantage.”


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