Telecommunications equipment maker Motorola said Monday that it will sell a military radio and radar division to defense contractor General Dynamics Advanced Technology Systems Inc. for US$825 million as part of its struggle to return to profitability.
The deal announcement was not wholly surprising. Motorola had said when it reported its most recent earnings in July that it was considering divesting the group.
The 3,000-person Integrated Information Systems Group is part of a larger Motorola unit that sells systems to businesses and government. That group, the Commercial, Government and Industrial Systems Segment, took in over a billion dollars in revenue during the most recent quarter.
"We feel certain that General Dynamics, with its strong government focus, will be the right home for the Integrated Information Systems' employees," Motorola Chairman and CEO Christopher Galvin said in a statement.
Analysts applauded the deal as a necessary move to refocus Motorola and to bolster its balance sheet. "The company's kind of akin to an eight-legged octopus," said Deutsche Banc Alex. Brown analyst Brian Modoff, referring to Motorola's many businesses, including semiconductors, cell phones and automotive electronics.
The Integrated Information Systems Group is "kind of a niche area," Modoff said. He characterized the move as more of a pruning than a dramatic refocusing of the company.
Shares of Motorola traded on the New York Stock Exchange dipped 3 cents, or 0.2 percent, to $18.60 as of 2 p.m. Eastern time.
The deal has already been approved by the boards of both companies and is expected to close within 60 days, pending normal regulatory approval.
Many industry watchers continue to speculate whether a sale would portend further selloffs of other Motorola units, including its troubled semiconductor unit. That unit's sales dropped 38 percent, and orders fell 51 percent in the second quarter. To date, however, the company has given no indication that it is considering such a move.
Still, anything is possible for a company that has reported two-straight quarterly losses after 15 consecutive years of unbroken profitability and has laid off about 15 percent of its workforce in the past year. Last week, at its annual analysts briefing, Galvin apologized for his firm's dismal performance. Until then, Galvin had steadfastly ascribed the company's woes to a global economic slowdown.