BRCM selling way overdone. Read this message::::::::::General Instrument Shares Fall on Concern About Possible Motorola Purchase
By John Stebbins
General Instrument Falls on Motorola Takeover Concern (Update2)
(Adds details in 2nd, 5th, 10th paragraphs. Updates shares.)
Horsham, Pennsylvania, Sept. 13 (Bloomberg) -- Shares of
General Instrument Corp., the largest U.S. maker of cable-TV set-
top boxes, fell as much as 5 percent on concern Motorola Inc. may
acquire the company for less than some shareholders expected.
General Instrument fell 2 1/8 to 50 3/8 in late trading
after earlier rising as high as 54 7/16. The Wall Street Journal
reported that Motorola, the world's No. 3 chipmaker, is in talks
to buy the company for about $10 billion. Motorola fell 7 to
91 3/4. Both companies declined to comment on the report.
General Instrument shareholders would get a little more than
half a Motorola share for each of their common shares, the
Journal said, citing people familiar with the talks. At current
prices, half a Motorola share would be $45.88. General Instrument
stock is up 49 percent this year, partly on speculation that it
might be acquired. Motorola is unlikely to pay much of a premium
to General Instrument's current stock price, analysts said.
``General Instrument has been up a lot over the last year
because of takeover speculation,' said Edward Jones analyst Mel
Marten. ``A lot of the premium a buyer would pay is already in
the stock price, and Motorola would take this into account,
assuming they're making the acquisition.'
Broadcom Corp., a maker of chips for cable modems that gets
about 28 percent of its sales from General Instrument, fell as
much as 8.6 percent on the news.
Digital TV
Horsham, Pennsylvania-based General Instrument is benefiting
from rising sales of digital equipment that unscrambles cable
signals while providing more channels and services than basic
cable systems. The company also is one of the biggest U.S. makers
of cable-modems, which provide super-fast access to the Internet.
Motorola makes chips that go into such devices.
Acquiring the company would help Schaumburg, Illinois-based
Motorola take advantage of growing demand for devices that let
televisions display movie-theater quality pictures and access the
Internet.
``Motorola has been aggressive in getting into new, emerging
markets,' said Mona Eraiba, a Gruntal & Co. analyst who rates
Motorola a ``strong buy.'
Some analysts said that General Instrument would be unlikely
to sell under the terms described in the Journal's report.
``If GI is really going to sell, it's going to be for a much
higher price,' said Lehman Brothers Inc. analyst Steven Levy. He
said a fair price for General Instrument is at least $55 a share.
Further, buying General Instrument could distract Motorola
from its effort to streamline its product line, some analysts
said.
``Motorola is still trying to regain the pre-eminence they
had a few years ago,' Rick Berry, a J.P. Turner & Co. analyst
who rates Motorola ``neutral.' 'I'm still waiting for Motorola
to get its mainline businesses in order.'
General Instrument's chief executive, Edward Breen, would
stay on, and his company would become a unit of No. 3 chipmaker
Motorola, the Journal said. Breen declined to comment.
The acquisition could be announced tomorrow after the close
of U.S. markets, CNBC said, citing unidentified sources.
Broadcom
The report sent shares of Broadcom, the leading maker of
cable-modem chips, down 7 15/16 to 111 1/16 on speculation that
General Instrument would start using Motorola chips. General
Instrument is Broadcom's biggest customer.
General Instrument isn't likely to shift abruptly to
Motorola chips, though, because of its existing contract with
Broadcom and because such a shift would require a time-consuming
redesign of the General Instrument box, BancBoston Robertson
Stephens analyst Arun Veerappan said.
``Assuming the report is true, right now the market
perception outweighs reality,' Veerappan said. ``But there could
be some change longer term.'
In July, General Instrument said second-quarter profit
before a gain rose 49 percent to $44.6 million, or 24 cents a
share, from net income of $30 million, or 19 cents, a year
earlier. The company was expected to earn 22 cents a share, the
average estimate of analysts polled by First Call Corp.
Revenue rose 7.9 percent to a record $527 million from
$488.5 million.
General Instrument had about 173.372 million shares
outstanding as of July 31, according to a U.S. Securities and
Exchange Commission filing.
Conference
Motorola is hosting a conference in Austin, Texas, this week
for analysts, investors and the media to discuss initiatives of
its semiconductor unit.
Motorola, also the No. 2 cellular-phone maker, said it is
interested in helping other companies develop products and
technology that would use its chips. One of the displays at the
conference showcased TV set-top boxes that could perform various
functions.
The company is streamlining its chip business after cutting
thousands of jobs and selling or closing aging chip factories. It
is now concentrating on high-profit chips.
In August, it completed the $1.6 billion sale of its low-
cost chip unit to financier David Bonderman's Texas Pacific
Group. About two years ago, the company had 94,000 semiconductor
products in its portfolio. Today, it's less than 20,000.
And in April, Liberty Media Group, the cable-TV programming
distributor run by John Malone, increased its stake in General
Instrument to 18 percent, becoming its largest shareholder at the
time.
Liberty purchased 10 million General Instrument shares from
two investment groups affiliated with Forstmann Little & Co. for
$280 million. General Instrument also bought 5.3 million of its
shares from the Forstmann groups for $148.8 million. |
