Motorola to buy Symbol for $3.9 billion

September 20, 2006|By Mike Hughlett | Mike Hughlett,Chicago Tribune

Motorola Inc. said yesterday that it would pay $3.9 billion in cash for Symbol Technologies, the leading maker of bar code readers and rugged mobile computers.

The deal is expected to be completed late this year or early in 2007. It's Motorola's biggest acquisition since its $17 billion buyout of cable TV equipment maker General Instrument Corp. in 2000.

Analysts generally praised the deal, saying it was priced fairly and should help Motorola broaden its customer base. "It's ultimately a good strategic move," said Bill Choi, an analyst at Jefferies & Co.

Motorola's stock fell 2 cents yesterday, closing at $24.93. Symbol's shares rose 8 cents yesterday to $14.75. Symbol's stock shot up 15 percent Monday after rumors of the deal leaked out.

The ho-hum response may stem from the notion that the deal won't have a major near-term financial effect.

"Even under a best case scenario, Symbol doesn't really do much," said James Faucette, an analyst at Pacific Crest Securities. The revenue that Motorola will get from Symbol will likely be equivalent to the sales of a few million new Krzr (Krazer) mobile phones, he said.

Motorola is the world's second-biggest cell phone maker and the Krzr, a follow-up to the Razr, is expected to be a big seller. It made its global retail debut yesterday in Hong Kong.

Motorola will pay $15 per share for Symbol, only a 2.2 percent premium to Monday's closing price of $14.67.

Thirty-one-year-old Symbol counts major retailers and manufacturers among its big customers. Its bar code readers scan prices at supermarkets and track inventory in warehouses. Its hand-held computers, which usually have bar code readers, are used by a host of workers, from doctors to delivery van drivers.

Symbol, of Holtsville, N.Y., is the market leader in so-called rugged mobile computers, with about a 31 percent share, according to a report by Lawrence Harris, an analyst with Oppenheimer & Co. Mobile computing made up 66.5 percent of Symbol's $1.8 billion in sales last year.

Motorola, of Schaumburg, Ill., does more than $36 billion in annual sales, the majority from mobile phones. The company also is big in selling mobile communications equipment to public agencies such as police and fire departments.

But Motorola has less of a presence in the so-called "enterprise," or business, market.

The Symbol deal will help fix that, more than doubling Motorola's current $1 billion in enterprise revenue. And it will boost Motorola's business-related product offerings.

Motorola's current enterprise sales come primarily from radio-related products. It sells some customized mobile computers, but not nearly on the scale as Symbol.

"The overlap [between Symbol and Motorola] is pretty minimal," said Gregory Q. Brown, president of Motorola's networks and enterprise business.

Symbol also makes equipment that connects mobile computers and bar code readers into local wireless networks - a network within an individual warehouse, for example. Such networks will complement Motorola's product lineup, which is focused on wireless networks for larger areas - for instance, a network for an entire town.

"We didn't have wireless LAN [local area network] business," Brown said.

Symbol is also the leading maker of scanners that read "RFID" labels, according to Oppenheimer's Harris.

RFID stands for radio frequency identification. The technology is still in its infancy and accounts for a small amount of Symbol's sales. But experts believe RFID may one day at least partially supplant bar codes.

Motorola's acquisition of Symbol will result in about $100 million in cost cutting between the two companies' operations by 2008, Brown said.

Symbol's 5,000 employees will become Motorola employees. Salvatore Iannuzzi, Symbol's chief executive, will remain head of Symbol's operations.

Mike Hughlett writes for the Chicago Tribune.

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