Originally created 09/15/99

Motorola in talks to buy General Instrument



NEW YORK -- Motorola Inc. is in talks to acquire General Instrument Corp., and Wall Street is expecting other bids to emerge for the leading provider of cable TV set-top boxes.

The acquisition would be a coup for Motorola, giving the company a stronger position in the fast-growing "broadband" technology, which combines Internet, television, radio and telephone services.

Motorola would pay about $10 billion in stock for General Instruments, according to reports Monday in The Wall Street Journal and the Los Angeles Times. A deal could be announced as early as this week, the papers reported.

The source familiar with the talks, who spoke with The Associated Press on condition of anonymity, confirmed the discussions Monday, but cautioned the talks could still fall apart.

General Instrument has long been the subject of takeover speculation on Wall Street and had been pursued unsuccessfully by Lucent Technologies Inc. and Nortel Networks Corp. A takeover of General Instruments may force other cable equipment makers to find partners, following the consolidation trend that is shrinking the number of cable TV operators.

Many General Instrument investors were disappointed by reports that Motorola offered between 0.5 and 0.55 of a share of its stock for each share of General Instrument. That would value General Instrument at $45.19 to $49.71 a share, based on Monday's closing stock prices.

"I would be surprised if the deal gets done at the price levels being discussed. I would be disappointed," said Jeff Parker, assistant portfolio manager for the PIMCO Target Fund, which owns about 500,000 shares of General Instruments. "I would be shocked if another suitor doesn't appear over the next couple of days."

Shares of General Instrument fell by more than 5 percent, or by $2.81 1/4 , to $49.68 3/4 a share Monday on the New York Stock Exchange, where Motorola's stock slid more than 8 percent, or by $8.25, to $90.37 1/2 .

Despite dissatisfaction with the reported terms of a deal, many shareholders said an alliance between the two companies made strategic sense.

There are more than 65 million cable TV subscribers in the United States, and many cable companies like AT&T Corp. are spending tens of billions of dollars to install new set-top boxes for high-speed Internet access as well as television programming and other features.

General Instrument is the largest supplier of set-top boxes to TeleCommunications Inc., which is owned by AT&T.

Motorola makes cable TV modems, as well as cellular phones, pagers, two-way radios and computer products.

"With AT&T now one of the largest cable operators out there, it absolutely makes sense for General Instrument to be part of a bigger organization with broader products to offer," Parker said.

Both Motorola, based in Schaumburg, Ill., and General Instrument, of Horsham, Pa, declined to comment.

For Motorola, the acquisition could put the company back on track. Motorola has drawn criticism for its hefty investment in Iridium, the high-profile satellite-phone company that filed for Bankruptcy Court protection last month.