PowerPC maker Motorola Inc. today said it has signed an agreement to purchase General Instrument Corp. in an all-stock deal worth approximately US$11 billion.

General Instrument (GI) makes television set-top boxes targeted at cable companies. Should the deal go ahead, General Instrument Chairman and CEO Edward Breen will head up a new Motorola business unit focused on giving consumers broadband access to interactive digital TV, Internet and voice.

The unit will consist of what is currently General Instrument as well as Motorola's Internet and Networking Group's cable business

The merger will bring broadband services to the US and the rest of the world more quickly, Christopher B. Galvin, chairman and CEO of Motorola said in a teleconference today.

Galvin predicted an "insatiable" demand for bandwidth. People want access to Internet, video and voice tailored to their needs, and ease-of-access is key, he said.

GI will disappear as a brand name. "Not to take the power of the Motorola brand would be stupid," said Breen. Motorola has a strong brand name worldwide, while GI's is mostly known in the US.

Breen expects the market outside the US to be six to seven times larger than the domestic market, and he sees Microsoft's Bill Gates "pouring investments" into Europe and Latin America as a good growth indicator.

Motorola and GI together can accelerate the convergence and the speed to market, Breen said.

The merger received praise from a large customer that the two companies have in common - Leo Hindery, president and chief executive officer of AT&T Broadband and Internet Services.

According to Hindery, who participated in the teleconference, a combined company will make it easier for AT&T to fulfil its promise to consumers on delivering affordable broadband services.

"But I feel like Steve Martin in the movie 'The Father of the Bride,'" Hindery quipped. "I don't know why I am here, but I know I get to pay for it."

However, Hindery may have been too modest in describing his role. He seems to have been directly involved in the matchmaking, which started in August, according to Motorola's Galvin.

When Hindery was asked about his involvement in the merger, he said that he had - on request - added insight on how the two companies' strengths could be combined for the benefit of customers such as AT&T Broadband and Internet Services.

"The consumers will have a brand that they instantly will trust," Hindery said referring to the Motorola brand. "That is important for the customers and my industry."

However, it is GI's set-top box technology that is the heart of the deal, according to one analyst.

When Frank Gens, senior vice president of Internet research at International Data Corp., earlier this week commented on rumours of the merger, he said Motorola wanted to lay its hands on next-generation Internet access devices.

According to Gens, the merger would be an example of the profound changes taking place in the Internet access business and illustrates how the focus is shifting from the PC to other Internet access devices such as televisions and appliances.

Gens, speaking at the IDC Forum in Paris, didn't specifically mention automobiles, but that was clearly on the agenda for Motorola's chairman.

Motorola will deliver end-to-end solutions to homes and automobiles, Galvin said. The merger will bring new customers to Motorola's portfolio, as well as a position in the access node arena, Galvin added.

Motorola has two major businesses. Besides developing integrated communications systems the company also makes processors for embedded use in set-up boxes, cell phones and automobiles, as well as for use in Apple's range of Macintosh computers.

The deal is due to be completed in 120 days and Motorola expects the acquisition to slightly dilute earnings per share through 2000, the vendor said in the statement.

Both companies' directors have already approved the deal, but it is still subject to the customary regulatory and stockholder approvals. General Instrument's largest shareholder, AT&T Corp. subsidiary Liberty Media Group Inc., has agreed to vote in favour of the merger, exchanging all of its outstanding shares for those of Motorola, according to Motorola. Liberty Media owns approximately 20 per cent of General Instrument.

(Additional reporting by Terho Uimonen in Paris.)