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Market Yawns at Motorola Cuts

Light Reading
News Analysis
Light Reading
9/28/2004

With the spinoff of its chip division, Motorola Inc. (NYSE: MOT) will cut 1,000 jobs, the company reported today.

Motorola did not issue a press release but mentioned the layoffs in an 8-K filing with the SEC today. The filing also mentions two restructuring charges expected for the third quarter, which ends this week: $50 million related to the spinoff, and $80 million to go to the early resignation of debts.

The job cuts include the support staff that's been associated with Freescale Semiconductor Inc. (Nasdaq: FSL), the semiconductor division that went public this summer (see Chip IPOs: 'Tis the Season?). The $50-million costs are in addition to the $50 million already incurred during the first six months of 2004.

In addition to chips for PCs and printers, Freescale also sells network processors to some of the industry's leading router and switch vendors.

Investors didn't react much to the news. Motorola stock was down 18 cents (1%) at $17.32 late today.

Analysts consider the layoffs a predictable effect of the spinoff and aren't rattled by the news. "The trimming of some jobs seems to be part of the normal course of business for Motorola's continuing transformation process," writes analyst Ren Zamora of Loop Capital Markets LLC, in a note issued this morning.

As for the restructuring charges, analyst Gregory Teets of A.G. Edwards notes that things are actually getting better. "After years of being beset with restructuring charges, Motorola appears to be winding down to more reasonable levels," he writes in a report published today.

The Freescale separation isn't quite done; Motorola still plans to disperse the spinoff's shares to Motorola shareholders by the end of the year. Motorola holds 67.5 percent of Freescale's Class A common stock and all of Freescale's Class B common stock, according to an SEC filing from July. That gives Motorola more than 90 percent of Freescale's shareholder vote.

— Craig Matsumoto, Senior Editor, Light Reading




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