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Motorola to spin off its semiconductor business

Motorola has announced plans to separate its semiconductor operations into a publicly traded company, reflecting its intention to increase its focus on communications and integrated electronic systems.
Motorola’s chairman and CEO Christopher Galvin announced that the company will spin off its Semiconductor Products Sector (SPS) as an independent semiconductor company with its own focused strategy.

Details of the transaction have not been finalized, but are likely to involve an initial public offering (IPO) of a portion of SPS, followed by a distribution of remaining shares to Motorola shareholders in a tax-free manner.

Motorola s worldwide semiconductor sales were $4.8 billion in 2002.

During a conference call, Mike Zafirovsky, Motorola s COO, said that the company expects to continue to purchase chips for its handsets – which include ICs manufactured using GaAs and SiGe - from its semiconductor business once the unit is spun-off.

"The relationships between the semiconductor business and other Motorola businesses are very strong and we anticipate they will remain as such,” said Mike Zafirovsky. “SPS will continue to be competitive to provide products to the other businesses."

Over the last several years, SPS has successfully executed an "asset light" business model that includes sharing the cost of developing advanced technologies, raising revenue from the licensing of intellectual property and introducing more new product offerings.

As a publicly traded equity, SPS will have the opportunity to pursue acquisitions of additional strategic product lines and technology using semiconductor equity valuations instead of the blended equity valuation of Motorola.

In addition, the semiconductor industry cycle appears to be in an upswing; therefore, Motorola believes the time is right to take these actions.

"We believe SPS is well positioned to increase its leadership in the end markets it serves, including the networking, communications, transportation and industrial markets," said Scott Anderson, president of Motorola SPS.

Motorola will retain its other five sectors focusing on cellular handsets and related software and services; cellular network infrastructure, software and services; integrated radio communications and information solutions for public safety, government and enterprises; automotive electronics, embedded computing systems and portable energy systems; and cable and broadband communications devices and technology.

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