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Last Updated: Monday, 6 October, 2003, 16:30 GMT 17:30 UK
Motorola takes chips off the menu
Motorola semiconductor plant in Japan
Motorola is one of the world's top chip makers

Motorola, struggling to restructure amid stagnant demand for its communications technology, has cheered investors by announcing the spin-off its its semiconductor business.

Motorola's chip operation, in itself one of the biggest firms of its kind, will be bundled into a separate company and eventually floated independently on the stock market.

The move, which analysts have long been urging, helped Motorola's shares jump by 7.5% as investors hoped the company could be turning a strategic corner.

The markets have been waiting for news from Motorola for the past two weeks, since chairman and chief executive Christopher Galvin resigned unexpectedly after clashes with the board over strategy.

Gaining focus

The decision to separate the semiconductor business does not directly save Motorola any money immediately.

But it helps refine the company's strategy, which some critics had seen as unfocused.

Motorola was one of the few large US firms that manufactured both finished consumer products and the circuitry that goes into them - a spread of activities that runs counter to current strategic thinking.

It also represents the first significant shift in strategy at the firm since hi-tech markets turned negative at the beginning of the decade.

Until now, the company had focused on swingeing cost cuts, including the eradication of almost 60,000 jobs.

Semiconductor manufacturing is no longer in the doldrums, with some forecasts tipping a modest global revival this year.

But it is a business that demands massive investments in fixed assets, something that Motorola's competitors in the mobile-phone market have tried to avoid in recent years.

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