Motorola to IPO chip division
PowerPC maker to become publicly traded spin-off
Motorola is to float off its semiconductor business, the company said today.
Motorola's Semiconductor Products Sector (SPS) has been rumoured to have had a 'for sale' sign up for some time, with Europe's STMicroelectronics at one time touted as a potential buyer.
But with no purchaser in the offing, Motorola has clearly decided that a float is the only remaining cost-effective way to rid itself of its loss-making division.
According to a company statement, issued this morning under the name of Chris Galvin, Motorola's soon-to-retire chairman and CEO, SPS will undergo an initial public offering. Motorola will retain a portion of the SPS shares before distributing them to "shareholders in a tax-free manner, subject to Motorola board approval, favorable market conditions, regulatory approvals and other customary conditions" at a later date.
The decision was made, said Galvin's statement, the better to increase Motorola's focus on communications and integrated electronics systems.
"Over the past several months, we have carefully weighed the best way to optimise the long-term potential of Motorola's semiconductor business," said Galvin in the statement. "After completing our four-month-long technology and strategic reviews in August, I recommended to the board of directors in September that... our 'asset light' semiconductor business could prosper as a separate entity. Our board of directors has given its full support to this recommendation."
Newly appointed SPS president Scott Anderson said he was "excited" about the opportunities the move will bring to the spun-off company.
Motorola chiefs some years back said they would ditch the chip business if it failed to improve its financial performance. After a long period in the red, SPS finally returned to profitability during Q4 2002, but fell back into the red during the first quarter of this year. During Q2, which ended on 28 June, it lost $134 million on the back of an 11 per cent year-on-year decline in sales to $1.1 billion. Orders slipped 25 per cent year-in-year to $1 billion.
Now it's seeking Wall Street approval for the move, Motorola noted that "the semiconductor industry cycle appears to be in an upswing" - it failed to mention that SPS' finances have of late been moving in the opposite direction. The company's Q3 figures, for July, August and September, will make interesting reading.
As yet no timetable has been given for the float. ®
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