DIVIDE AND CONQUER GI split puts accent on broadband >BY CHRIS BUCHOLTZ, Intelligence & Software Editor

General Instrument, once a powerhouse in the high-end electronics and components industry, now sees much of its future in broadband telecom.

In a three-way split-up of its major operations announced last week, GI created NextLevel Systems, a company that will focus on the manufacturing of equipment for two-way multimedia networks. The units being grouped under NextLevel-all telecom-related-have come to account for nearly two-thirds of GI's annual revenues.

CommScope Inc. and General Semiconductor, the two other companies created in the restructuring, respectively incorporate GI's coaxial cable manufacturing operations and electronic components business. The tax-free spinoff to shareholders is expected to be completed this summer.

GI acknowledged that the creation of NextLevel Systems, which will supply set-top boxes, cable modems and other components for voice, data and video networks, including the Internet, is designed to position it beyond its traditional base of cable TV customers.

NextLevel Systems combines the activities of GI's Communications division and its NextLevel Communications subsidiary, named for the company it acquired in September 1995. Together the two units account for $1.7 billion of GI's $2.62 billion sales.

The NextLevel acquisition has already given GI an entree into the local exchange carrier segment, as it has resulted in a recent contract for the digital equipment from Nynex.

"We want to become a major supplier to all segments of the telecommunications market, and we think that all three segments we're looking at-satellite, cable TV and telephony-are important," said Tom Ames, who will serve as co-president of NextLevel with Pete Keeler. "In all three arenas, services and methods of delivery stay fairly constant. It's the systems that are different, and this split will let us focus our energy on developing those systems.

Along with Ames and Keeler, the management teams of GI Communications and NextLevel Communications will lead NextLevel Systems after the spinoffs. Richard S. Friedland, chairman and chief executive officer of General Instrument, will become CEO.

The split was part of a strategy that had been in place for more than a year, said Friedland. "Our strategy was, when the time was right, we would split the company," he said. "CommScope and General Semiconductor are at the top of their peer groups, but they're slower growth and higher cash flow than NextLevel. In effect, they served as booster rockets to launch our network-focused company.

The restructuring will allow the three companies to address their markets in a more comprehensive way, and will put NextLevel in a better position to recruit the talent needed by "any company hoping to make serious gains in the telecom industry," he said.

NextLevel will be organized in three divisions around its core markets."The divisions will operate independently of each other, so they won't be banging into central engineering," said Keeler.

The split comes at a crucial point for GI and NextLevel. In the past year, the company began volume shipment of its digital set-top boxes, next generation satellite systems and SURFboard cable modems.