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Motorola To Spinoff Its Semiconductor Division

Motorola To Spinoff Its Semiconductor Division

by , 4:30 PM EST, December 17th, 2003

Now that Apple is starting to cozy up to IBM for the heart of its computers, what of Motorola, who has supplied processors and other chips for Apple products for decades?

According CBS MarketWatch, the semiconductor arm of Motorola will become a subsidiary of Motorola and stocks for the spinoff will be offered publicly. This from the MarketWatch article, Motorola proceeds with $2 bln spinoff:

Motorola, best known as a maker of cellular phones and other wireless devices, filed Wednesday to make an initial public offering for its struggling semiconductor unit that's expected to raise $2 billion.

The filing comes one day after Schaumburg, Ill.-based Motorola (MOT: news,chart, profile) selected Ed Zander as its new chief executive and almost three months after first announcing plans for the spinoff.

Motorola's shares fell 1.2 percent lately to stand at $13.17.

Motorola and its chip unit have struggled in recent years under a bloated cost structure and waning demand. In 2003, Motorola likely won't be ranked as a top 10 semiconductor manufacturer for the first time since it began producing chips in 1959.

Get the full story from CBS MarketWatch.

The Mac Observer Spin:

Motorola still plays a major role in Apple's current strategy; Apple's consumer line of products will likely not see G5s for some time to come, so the G4 will likely continue as the processor of choice in iMacs and iBooks. Of course, that could all change as IBM rolls out faster G5s, leaving the slower models, which would presumably be less expensive, available for consumer models.

Be that as it may, Motorola may be facing tougher times ahead, if its history with Apple is any indication. Motorola's inability to ramp up processors speeds for Apple products has done more than hurt Apple's marketshare, it has put a very dark spot on Motorola's reputation. If a company cannot depend on a supplier to deliver what it needs to remain competitive then that company will look elsewhere for the parts it needs. Unfortunately, customers of Motorola may look at how Apple was treated and decide to limit or eliminate its dependence on Motorola. Apple appears to have done so, other Motorola customers may do the same.

To remedy the situation Motorola must rebuild its reputation, and that is something very hard to do. Motorola has had a long a fruitful history, particularly with Apple, and we can only hope that the semiconductor arm of the company will continue in some capacity.

You never know, Apple's next processor may come from Motorola.

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