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Motorola Moves to Reintegrate Next Level

To allay concerns about the soundness of a subsidiary's finances, Motorola is bidding for the 26 percent of Next Level Communications it does not already own.

Motorola, a cell phone giant, is offering $1.04 per share, or about $30 million cash, for Next Level, a producer of very-high-speed DSL equipment that helps carriers transmit broadband content over existing phone systems.

The proposed purchase price represents a 14.4 percent premium over Next Level's Friday closing price and a a 28.6 percent bump over the average closing price for the last 90 trading days.

"Reintegrating our Next Level subsidiary provides the talented Next Level team a financially sound base and broader resources to continue deploying industry-leading broadband access platforms," said Don McLellan, a vice president for Schaumburg, Ill.-based Motorola.

At the same time, McLellan conceded the move would eliminate the distraction and management time "spent reassuring customers and suppliers of Next Level's financial viability, seeking additional financiing sources and remaining publicly traded."

Motorola acquired its Next Level stake through the purchase of General Instrument Corp. in January 2000. At the time, Motorola was making buys (as well as significant venture capital investments) to expand its presence and profits beyond handsets.

Since then, however, the telecom equipment market has been tripped by the economy. Carriers and communications providers have canceled or delayed orders, resulting in the failure of dozens of companies. Given this backdrop, Motorola provided Next Level with about $175 million in direct financing for operations and $30 million in guarantees.

But despite recently announced deals, Motorola worried that the company's stock price, which has languished below the market-required $1 per share mark in recent months, would cause potential customers to choose larger vendors.