Motorola to Spin Off Semiconductor Unit
By Carlo Longino, Mon Oct 06 20:15:00 GMT 2003

Seems like we've been posting a lot about Motorola and their strategy of late, and their latest move is to separate and spin off their chip unit to focus on telecommunications and consumer products.

Astute readers will remember that Moto CEO Chris Galvin's resignation a few weeks back was put down to strategic differences with the company's board. Curious timing then, that the spin-off (for which investors have been clamoring a long time) would come before Galvin's replacement takes over.

Motorola's chip unit is the company's second-largest, accounting for nearly a fifth of its sales last year, but although it was once a dominant force in the industry, has fallen from the list of top ten semiconductor makers in the world. About a quarter of its sales are to other Motorola units, its mobile-phone business in particular, and the company says those sales will continue.

While business talk a lot about spin-offs to "better valuate the company as a whole" and things like that, what's more likely the motivation for Motorola here is to exit the notoriously cyclical chip business, something that hasn't been turning consistent profits for the company for some time.

But not everyone is convinced that the spin-off makes sense, making the cogent point that the unit hasn't been performing, and that putting it out on its own won't automatically change that. And one obvious concern is that once the company is independent and competing in the market, Motorola won't continue to buy chips from them, leaving them without their top customer.