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[DPRG] Concerns for people with Motorola Processors in their Robots?

Subject: [DPRG] Concerns for people with Motorola Processors in their Robots?
From: Kipton Moravec kip at kdream.com
Date: Tue Oct 7 09:13:12 CDT 2003

Motorola Will Spin Off Its Money-Losing Semiconductor Business

Published: October 7, 2003

OT">Motorola said yesterday that it planned to divest its struggling 
semiconductor operations from its cellphone and communications equipment 
businesses, a step that had long been favored by Wall Street and opposed by 
top management.

The announcement came less than two weeks after Motorola, based in 
Schaumburg, Ill., said that Christopher B. Galvin, its chairman and chief 
executive, would retire as soon as a successor could be selected. Many 
investors and analysts have speculated that disagreements with the board 
over the future of the chip-making operations played a crucial role in Mr. 
Galvin's decision to retire from Motorola, a company founded by his 
grandfather, Paul V. Galvin. But Mr. Galvin said yesterday that the 
recommendation to shed the semiconductor unit he had so often described as 
a core business came from him.

Mr. Galvin said that he proposed the spinoff after a four-month review of 
the company's businesses and that it was not a point of conflict with the 

Motorola said the split would probably be a two-step process starting with 
a public offering of stock in the semiconductor unit, followed by a 
tax-free distribution of the remainder of the new shares to Motorola 
stockholders. In a conference call with analysts, Motorola's chief 
financial officer, David Devonshire, said he could not yet indicate how 
many shares of the semiconductor business might be sold or when the 
offering would be made.

"We are in the very early stages of planning the details of the 
separation," Mr. Devonshire said.

That was enough, though, to excite investors. Motorola's shares rose $1.22, 
or nearly 10 percent, to close at $13.50. Without the semiconductor 
business, Motorola would be a purer play for investors in 
telecommunications, although it spans so many segments of the industry that 
no company is strictly comparable.

Motorola is the second-largest cellphone maker after Nokia. It competes in 
the telecommunications equipment business with companies like Ericsson, 
Lucent Technologies and Nortel Networks. It dominates the market for 
two-way radios and other communications systems used by police agencies. 
The company is also a leader in broadband equipment for cable television 
systems, where its big rival is ScientificAtlanta. And it integrates 
communications and electronics for a variety of industrial and automotive 

Motorola's semiconductor operations had revenue last year around $4.8 
billion, or about 18 percent of the $27.3 billion in total revenue. The 
business has contracted sharply since the semiconductor industry fell into 
a deep slump in 2001. Motorola has always been its own best customer. About 
20 to 25 percent of its chip production is sold to other Motorola enterprises.

The unit is a world leader in the highly fragmented business of making 
microchips that control the operations of motors and other machinery. Its 
close relations with Detroit make it the world's largest supplier of chips 
for electronics that are embedded in cars and other vehicles. About a 
quarter of its sales are for wireless and mobile communications products.

The spinoff is being planned to take advantage of improving conditions in 
the semiconductor industry, which has picked up steam in recent months. The 
Semiconductor Industry Association, a trade group, expects worldwide sales 
of all chips to be up 10 percent this year.

Motorola's operations have been slower to recover than those in other 
sectors of the chip business. In the first half of this year, according to 
IC Insights, a market research firm, Motorola fell out of the ranks of the 
top 10 semiconductor manufacturers for the first time since it opened a 
chip plant in 1959.

Analysts say the unit could be expected to saddle Motorola with at least 
$300 million in losses this year, but should be profitable in 2004. Some 
analysts also expect the semiconductor unit to sell several major 
operations and try to buy others as soon as it is independent.

"The Motorola semiconductor business you see today is not one you'd 
assemble if you were starting from scratch," said Matthew Hoffman of 
Soundview Technologies, a research firm in Stamford, Conn. "I think 
investors are going to assume that there is a second wave to this split-up."

Motorola's luster in semiconductors has been fading since the 1980's. Its 
PowerPC design, developed with I.B.M., fared well in industrial 
applications but failed to live up to a goal of competing with Intel in the 
personal computer market. Under Mr. Galvin, the company quit making memory 

"Basically, they have no flagship product," said Fred Zieber, president of 
Pathfinder Research in San Jose, Calif. "They are the leader in tough 
markets where the margins are not high."

Like other chip makers, though, Motorola was caught off guard by the drop 
in demand beginning in 2001. Since then, it has sharply reduced its capital 
investment in microchips, laid off thousands of workers and increased its 
reliance on outside manufacturers.

Motorola has also stepped up efforts to license its semiconductor 
technology to others. Last year, it announced a drive to package chips with 
other components in "chip sets" that would be the building blocks for 
products like cellphones that other companies could assemble and sell, 
often in competition with Motorola's own cellphone group.

Motorola said yesterday that it would continue to work closely with the 
semiconductor unit once it became independent, but that the divestiture 
would make it easier for the chip business to sell its wares to Motorola 
competitors and to acquire other companies. It also said a spinoff would be 
good for shareholders because the rebound in the chip market had lifted 
semiconductor stocks.

Left unsaid was the assumption that Motorola's remaining businesses might 
also benefit from looser ties to the semiconductor unit as other outside 
suppliers see the opportunity to win business that once seemed locked up.

Motorola's big semiconductor operations in the United States are in Austin, 
Tex., and Phoenix. Scott A. Anderson, who was appointed to lead the unit in 
July, is expected to lead the spinoff and become chief executive of the new 
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