NextLevel Will Spin Phone Business into Partnership

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Chicago -- NextLevel Systems Inc., which will change itsname back to General Instrument Corp. early next month, will place its telephony arm intoa limited partnership controlled by New York technology investment firm Spencer Trask& Co.

In the arrangement, Spencer Trask will acquire about 10percent of the NextLevel partnership, with options to acquire 10 percent more, and will bethe operating partner. NextLevel will become the limited partner.

Rohnert Park, Calif.-based NextLevel Communications, thedivision NextLevel is putting into the partnership, has orders from U S West Inc. and BellAtlantic Corp. for its switched digital access system.

Ed Breen, chairman and CEO of NextLevel Systems, said in astatement that the transaction 'gives GI's shareholders the best of allworlds,' because the new partnership gets funding and venture capital expertise, andGI can focus on its core cable and satellite TV business without an expense drag.

Based on the partnership structure, NextLevelCommunications' results will be deconsolidated from NextLevel Systems, which willrecord an after-tax write-off of about $45 million to fully reserve GI's loan to thenew partnership, executives said. That's in addition to previously announced,one-time after-tax charges of $65 million to $100 million, or between $0.42 and $0.64 pershare, in the fourth quarter of 1997 and the first quarter of 1998.

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