Stock in the telecoms manufacturer closed the day up 1.22 dollars at 13.50 dollars -- a new 52-week high.

"We believe that by creating two independent companies, we will be able to better unlock the value of Motorola's existing businesses," chairman and chief executive Christopher Galvin said in a statement.

A preliminary plan calls for the troubled telecom equipment-maker to sell a portion of the semiconductor unit to investors in an initial public offering.

The remaining shares would be distributed to existing stockholders in a tax-free manner.

The company did not give a timeline on the divestiture and executives told investors they would to wait until next week's quarterly financial report or upcoming filings with the Securities and Exchange Commission for further details in a conference call.

"My intention is to give my successor a formidable platform on which to build," outgoing CEO Galvin said on the same call.

Galvin, who resigned last month after clashing with the board over the company's strategic direction, said the timing for the spin off is right because the global semiconductor business appears headed for an "upswing."

The industry suffered through its worst year ever in 2001 and has only slowly recovered.

Many Wall Street analysts have been urging Motorola to sell the underperforming chip business and invest the cash in more lucrative parts of the company's operations.

The company's semiconductor business racked up 4.8 billion dollars in sales last year, or about 20 percent of total revenue, but the semiconductor unit didn't post an operating profit.

In the most recent quarter, the unit lost 134 million dollars from operations as sales fell 11 percent to 1.1 billion dollars.

The unit designs and produces chips for cell phones, broadband modems and other communications devices, as well as automobiles It's the world's biggest maker of embedded processors.

Greg Teets, an analyst with AG Edwards and Sons, said the spin off would remove operating losses in semiconductors from the core Motorola business, and an "inherent conflict" with one of its core businesses -- mobile phone handsets.

While Motorola sells semiconductors to Siemens and some Asian manufacturers, it competes with them in the field of mobile phones.

"This eliminates that inherent conflict," said Teets.

Cynthia Meng, an industry consultant at Adventis, agreed.

"If they spin off the company they have a better chance to get contracts from the other telephone vendors, like Nokia or the Chinese vendors," she said.

"The timing is good for the spinoff, for three months the fundamentals of the semiconductor business have been improving."

With its own publicly traded stock, meanwhile, the semiconductor business would be able to pursue acquisitions of strategic product lines and technology, the company said.

Jeffrey Schlesinger, an analyst with UBS Investment Research, put the estimated value of the unit at between 7.5 and 10 billion dollars, and said its divestiture could drive up the company's share price.

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