Motorola could buy General Instrument for $10bn

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Motorola is in talks to acquire General Instrument, a cable-television-equipment maker, in an all-stock deal valued at about $10bn (£6.2bn), people familiar with the matter say. Such a deal would unite one of the world's best-known consumer-electronics makers with the cable industry's leading provider of TV set-top boxes, marking the latest in a string of high-profile mergers that have roiled the cable-TV industry and recast the competitive landscape. The mergers are aimed at positioning the participants for a foothold in the emerging "broadband" market for interactive voice, data and video services. Under terms of the proposed deal, General Instrument stockholders would get a little more than half of a Motorola share for each of their common shares of General Instrument. In New York Stock Exchange composite trading Friday, Motorola closed at $98.75 a share, up 6.25 cents, and General Instrument ended at $52.50 a share, down 43.75 cents. General Instrument's chief executive, Edward Breen, is expected to remain as head of the company, which would become a unit of Motorola. Barring any last-minute snags, a deal could be announced as early as this week, people familiar with the matter say. General Instrument and Motorola declined to comment. A deal with General Instrument would give Motorola a much-needed boost. The electronics company has been battered in the marketplace during the past year as its earnings failed to meet Wall Street's expectations, though in more recent quarters it has gained steam. Motorola's reputation as a technology leader has taken a hit over Iridium, the high-profile satellite-phone project whose principal backers include Motorola. Iridium recently filed for bankruptcy-court protection. Motorola has continued to defend the $5bn project, even as Iridium's problems have continued to pile up. General Instrument, for its part, would benefit by being brought into the Motorola family. Iridium missteps aside, Motorola has long been considered one of the world's great technology leaders. The company over the years has pioneered such technology hits as the car radio, cellular phones and pagers. It is also a leading provider of semiconductors, an integral component of set-top boxes, which would no doubt come in handy as General Instrument continues to look for ways to cram more and more functions into its set-top boxes. Then there is the vaunted Motorola name, whose cachet far exceeds the General Instrument logo in the general marketplace. According to people familiar with the matter, the Motorola name would be used on General Instrument's equipment, giving the gear a higher profile with consumers. By aligning itself with General Instrument, Motorola would gain a valuable partner in the emerging broadband market, which is widely seen as a gold mine of future industry profits. Broadband, in cable-industry parlance, refers to upgraded cable-TV lines that are capable of handling an array of digital services. General Instrument has long enjoyed a special relationship with the cable-TV industry. That owes in part to its close ties with such cable notables as John Malone, the former chairman of Tele-Communications, and its own aggressive approach to the business. General Instrument last year offered cable companies a piece of the company in exchange for placing big orders for digital set-top boxes. TCI earlier this year was acquired by AT&T The deal left Malone in charge of TCI's former programming arm, Liberty Media Group, which continues to be a major investor in General Instrument. Other notable investors in General Instrument include Sony, which has around a 5 percent stake. As General Instrument's star in the cable-TV-equipment field has risen during the past few years, so has interest by a bevy of would-be suitors. People familiar with the situation say the Motorola talks came on the heels of talks with other companies that had sought to gauge its interest in a partnership, joint venture or outright merger. A marriage between Motorola and General Instrument could turn into a boon for consumers. Motorola could use its expansive network of retail outlets to help make cable set-top boxes as readily available to consumers as its cellular phones. The Federal Communications Commission has been pushing the cable industry to make its set-top gear widely available through retail outlets. FCC Commissioner Susan Ness, among others, hopes competition among retailers would lead to better prices and products for consumers. Cable companies, which have traditionally leased the boxes to consumers for a monthly fee, have so far resisted. But they may not have much choice if Motorola succeeds in getting into the retail game with any force.

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