Motorola to separate its semiconductor arm

7 Oct 2003

Motorola is to separate its semiconductor operations into a stand-alone publicly traded company to take advantage of a perceived upswing in the processor market. The company’s Semiconductor Products Sector (SPS) employs 44 skilled design engineers in Cork designing and developing chipsets for the next generation of mobile devices.

The latest move may be regarded as a swansong gesture by Motorola’s outgoing CEO Christopher Galvin, aimed at providing greater clarity in the mobile market.

While the company has not finalised the details of the transaction, such as what market it will float on, terms for shareholders and benefits for employees of the division, Motorola believes that the SPS division could prosper better as an independent company with its own focused strategy.

Over the past several years, SPS has executed an ‘asset-light’ business model that combines a balance of shared cost with other mobile operators in developing advanced technologies, revenue from the licensing of intellectual property and new products in the fast growing realm of wireless networking.

Motorola said that because the global semiconductor market appears to be on the upswing, the time was right to take this action. The SPS unit has been instrumental in designing the chipsets for Motorola’s mobile phones as well as numerous other market players. For example, the company designed the PowerPC chip that is shared between IBM and Apple.

The company is considering an initial public offering (IPO) of a portion of SPS, followed by a distribution of remaining shares in a tax-free manner, subject to Motorola board approval, market conditions and regulatory approval.

Last month Galvin announced his decision to step down from the helm of the company that is celebrating 75 years in business. According to analysts it is an extension of his all-pervasive “back-to-basics” approach that was the hallmark of his time as CEO.

Discussing the spin-off, Galvin said: “Over the past several months, we have carefully weighed the best way to optimise the long-term potential of Motorola’s semiconductor business with the leverage we would gain by concentrating our resources on our communications products and integrated electronic systems businesses.

“After completing our four-month-long technology and strategic reviews in August, I recommended to the board of directors in September that Motorola focus its future on retaining and augmenting all five Motorola sectors that compose our communications products and integrated electronic systems businesses and that our ‘asset-light’ semiconductor business could prosper as a separate entity,” Galvin said.

As well as the SPS unit in Cork, Motorola employs a further 550 people in its Global Telecommunications Solution Centre in Cork, plus a further 50 workers at its Energy Systems Group in north Dublin. These will not be affected by the proposed spinoff.

By John Kennedy