Motorola to spit out General Instruments?

One of the first and most important Linkabit spinouts was the Videocipher division, which designed and built settop boxes for 10' C-band dish owners who wanted to watch HBO. In the late 1970s, Videocipher was one of Linkabit’s fastest growing divisions and slated to become its first high-volume consumer business; the Linkabit founders have said that the capital needs of building this business were a major factor in selling the company to M/A-COM.

M/A-COM acquired all of Linkabit in 1979-1980, and then after Andy and Irwin left, M/A-COM sold Videocipher (and other commercial TV businesses it had acquired) to General Instruments in 1987 for $220 million. The local San Diego GI team worked on a number of issues related to settop boxes, including the DOCSIS standard that both enabled the widespread adoption of cable modems and commoditized the business, destroying profit margins.

In 1999, Motorola offered $11 billion for General Instruments and the deal closed in January 2000: for almost a decade, the local ex-Linkabit outpost has been a Motorola facility. Continuing to build on the original Videocipher direction, San Diego is headquarters for the public key infrastructure (cryptography) operations of Motorola Inc., assuring Hollywood today (as 30 years ago) that no one is going to get copyrighted entertainment without paying for it.

Now the WSJ reports (picked up by others) that Motorola is looking to unload the settop box division for about $4-4.5 billion. It’s not clear whether the buyer would be another telecom company or a private equity firm hoping to spruce it up and resell it. I’ve not been out to the Sequence Drive facility in several years, but my impression was that the division (like the rest of Motorola) has been enduring a series of job cuts.

Motorola — co-led by former Qualcomm COO Sanjay Jha — is also said to be re-opening plans to dump its declining handset business, once the market leader but for the past few years in rapid freefall. Jha was hired in August 2008 to run the handset business, but the spinoff was halted this time last year after it was clear the business had to be fixed before it could be sold.

As Jha predicted six months ago, Motorola has gotten a nice bounce from its Android phones, suggesting that now is the time to sell (or spinoff) the division. No word on whether Jha will stay with the mobile division he currently heads when it’s spun out; in the past year he’s been much more visible than the other CEO, Greg Brown, who heads the broadband division.