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Motorola hints at chip biz sell-off – again

This time, only if it does make a profit

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Profitability may not be enough to save Motorola's chip operation from being sold, the parent company's chairman and CEO, Chris Galvin, suggests.

Despite a return to profitability, Motorola's government business wing was sold off last September, and Galvin draws parallels between that division and the Semiconductor Products Sector.

"Two years ago we were losing a lot of money in the government business, and we said there is no sense in selling it now or disposing of it now," he said,
at UBS Warburg's Global Telecom Conference, held in New York this week. "We fixed it. We got it generating significant positive cash flow and double-digit pre-tax profits. We sold the [government business division] last September."

The implication is clear: once SPS returns to profitability, there's a real chance that Motorola will seek to boost its finances by ridding itself of the operation.

However, such a plan contradicts comments made by Motorola executives in the summer. In August, Motorola president Robert Growney said that a deadline has been set by which SPS must show that it can start sufficiently contributing to the company's bottom line. Growney would not say how long SPS has to achieve this goal.

And Ed Gams, Motorola's investor relations chief, added: "No segment of the company is sacred in terms of being protected from its obligation to contribute to that level of financial return.

"The present level of financial performance of the segment cannot be tolerated. Improvements are expected.

"There are no sacred cows here."

But Galvin's reference to Motorola's former government sales operation suggests that he can't sell it until it does become profitable again.

The plan appears to centre on getting SPS into a position where Motorola can sensibly make a decision over its future, Galvin said. If SPS "is valued at two, four, or six, or eight times sales, one can decide whether you want that in the portfolio or not," he said. "That's the essence of the plan we are working on right now." ®

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