The all-stock deal, valued at about $17 billion, was completed after shareholders of General Instrument, a television set-top box manufacturer, approved the merger at a special meeting today.
Motorola, a major telecommunications equipment maker, is on the rebound after some rocky years during the 1990s. The company's acquisition of General Instrument signals the latest step in its quest to offer what it calls "integrated communications solutions" and "high-speed access" devices.
By combining Motorola's expertise in voice, data and wireless mobile communications with GI's strengths in the video and data markets, executives hope to be a leader in the so-called convergence market. "Converged" networks aim to carry voice, video and data traffic simultaneously, allowing for higher connection speeds and lower costs for end users.
"If you look at the growth opportunities over the next five to seven or so years, it's the bringing of bandwidth, the Internet and wireless together for the consumer," Motorola chief executive Christopher Galvin said on a conference call. "There's an infinite demand for the human being to want to communicate."
Former GI chief executive Edward Breen said the merger gives the company the scale and brand recognition to compete in the high-speed, or broadband, communications market globally.
"This merger is a growth story. ... Clearly many new growth areas will be presented by this combination," Breen said. "International opportunities will become very significant as broadband gets rolled out overseas."
Breen, now executive vice president at Motorola, will oversee a newly created unit called the Motorola Broadband Communications Sector, which will include much of GI's technology such as analog and digital set-top boxes, the cable TV conversion boxes that many industry experts predict will serve as communications and entertainment gateways into consumers' homes.
The new Motorola division plans to develop access technologies such as set-top systems for cable and wireless television systems, cable modems, cable network transmission--or "head end" equipment--and circuit-switched and packet-switched cable telephone technologies. The unit also is expected to develop gateway and "home hub" technologies for managing the flow of traffic to and from consumers and businesses.
Breen said digital cable television services will continue to grow in 2000 with set-top boxes potentially being used for Internet-based phone service as early as 2001. Exciting market opportunities also exist for video-on-demand services, he said.
The transaction will be accounted for as a pooling of interests. Motorola doesn't expect the merger to dilute earnings in 2000 and the deal is likely to strengthen earnings in 2001 and later, the company said.
As a result of the merger, Motorola also now holds about an 80 percent stake in broadband communications company Next Level Communications.
Stock in Motorola fell more than 2 percent to 134.25. Shares, which climbed throughout much of 1999, have traded as high as 153.63 and as low as 62.56 in the past year. Stock in General Instrument fell 3 percent to close at 77.19.