On Thursday (Aug. 23), as multiple media outlets were writing that Motorola was planning to sell or spin-off the Semiconductor Products Sector (Austin, Texas), Growney penned an e-mail addressed to all sector employees. In the note, he termed those stories a "purposeful misinterpretation" of remarks he had made earlier this week to a group of financial analysts.

"During my meeting," Growney wrote, "I reiterated SPS' drive to improve its financial performance. When asked what could happen if it did not improve, I acknowledged that while a sale or spin-off could not be ruled out, we did not expect this to occur. I pointed out that we expect each of our business units to contribute to shareholder value and that SPS has a timetable for improving its financial performance. Referring to all of our business units, I said that our patience is not 'infinite,' and that there 'are no sacred cows and no segment is immune.' "

Not surprisingly, the possibility of selling or spinning off its chip unit has caused turmoil in that division, and Growney's note attempted to calm some of those worries. "While SPS is going through some difficult times as a result of a severe downturn in the chip market, I want to assure you that this sector is a valued and valuable part of Motorola. [Semiconductor Products Sector president] Fred Shlapak and his team are hard at work developing a business model that will return SPS to profitability and lead to performance levels comparable to its major competitors."

Growney closed with a vote of support. "We are confident that SPS can return to financial health in a reasonable period of time and continue its role as an essential part of Motorola. The most important thing all of us can do to improve Motorola's overall performance is to focus on serving our customers and creating greater value for our shareholders."

Growney's comments follow a devastating year for Motorola's chip unit. The unit saw its revenues drop 30 percent in the first half of 2001 and announced in February that it would lay off 4,000 workers this year.

Industry analysts said, however, that Motorola's position isn't much different from that of other chip makers right now. "The industry has reached a point where vertically integrated companies are finding it challenging to be competitive," said Mark Edelstone, semiconductor analyst for Morgan Stanley (San Francisco).

Edelstone pointed to a long list of chip companies that have been spun off from larger conglomerates or that have liberated other units in order to focus on semiconductors, including Agere Systems, Infineon, Intersil, Conexant and ON Semiconductor; the latter company was spun off from Motorola.

"I have to believe that any prudent manager would be looking at this as an option," Edelstone said.

Furthermore, despite its shaky financial status, the chip unit may be looking down the road at the massive expenditure needed to build a 300-mm fab, which could be pushing executives at the Schaumburg, Ill., headquarters to embrace the idea of a spin-off. The company does not have a manufacturing facility capable of producing 300-mm wafers and will have to invest upwards of $2 billion to build one. While Motorola does not need that capacity now, one observer noted that it will likely have to at least start that process within the next 12 to 24 months if it wants to retain its role as a world-class chip company.

Industry insiders said that Growney's comments are most likely a carefully crafted message to Wall Street. "Here you have a bunch of financial analysts who want to know how many billions of dollars Motorola will have to spend to keep this capital-intensive business afloat," said a former Motorola executive who asked not to be named. "So they let it be known that they won't have any cash problems because they can always sell the business and generate cash. At the same time, this is a good way to let it be known that the business could be for sale, maybe as a way of creating a bidding war."