NEW YORK (CNN/Money) - Motorola appears to be finally shedding a silicon albatross from its neck.

The world's second-largest maker of cell phones announced Monday morning that it intends an IPO of its money-losing semiconductor business, which accounted for more than 18 percent of the company's total sales in the first half of 2003.

Wall Street loved the move. Shares of Motorola (MOT: Research, Estimates) surged more than 10 percent Monday. And the reaction is probably justified, especially since it comes on the heels of CEO Chris Galvin's resignation last month.

"There were two things investors hated about Motorola: Chris Galvin and the semi business. Now they are getting rid of both," said Casey Ryan, an analyst with Wells Fargo Securities.

Shedding the chip business should allow Motorola to clean up its balance sheet so it can focus exclusively on communications and networking equipment.

Although Motorola gave few specifics about what the new semiconductor company's balance sheet would look like, analysts speculated that the semiconductor business likely would wind up with a nice portion of Motorola's overall debt. As of the end of June, Motorola had nearly $8 billion in debt on its balance sheet.

What's more, Motorola would benefit from not having to continue funding a business that is highly cyclical and capital intensive.

"Motorola had to spread its resources over too many areas. By moving away from the semiconductor business, it can spend more on research and development and also make its earnings stream more smooth," said Sunil Reddy, manager of the Fifth Third Technology fund.

The timing for an IPO appears to be good as well as the chip business overall is showing signs of strength and investors clearly are willing to pay premium prices for semiconductor stocks.

David Devonshire, Motorola's chief financial officer, conceded that this was one of the motivating factors in a conference call Monday morning. "The valuations of semiconductor companies are accelerating," Devonshire said.

Chips aren't cheap Motorola's semiconductor competitors trade at much higher valuations. Company  Price-to-sales ratio  Motorola  1.1  RF Micro Devices  3.1  Texas Instruments  4.2  Intel  6.1  Microchip Technology  7.4  Qualcomm  9.3   * Based on revenue estimates for the next 4 quarters  Source:  Thomson/Baseline

Motorola trades at just a tad higher than 1 times revenue estimates for the next four quarters. By way of comparison, Intel (INTC: Research, Estimates) trades at more than 6 times expected sales while Qualcomm (QCOM: Research, Estimates) is valued at more than 9 times revenue estimates.

Now it's highly unlikely that Motorola's semiconductor business would receive that type of valuation, considering that it reported a $246 million operating loss in the first half of 2003 and a sales decrease of 5 percent from a year ago.

But considering that the chip business seems to be finally entering a recovery, John Bucher, an analyst with Harris Nesbitt Gerard, said Motorola's chip business could fetch a value of 2 times estimated 2003 sales. That would work out to about $10 billion.

Still, since Motorola has given no details as of how much of the semiconductor company it planned to sell in an initial public offering, it's tough to say just how much cash Motorola could raise.

And analysts were quick to add while the restructuring news was good for Motorola, it might not be for the separate semiconductor company, especially if it is in fact weighed down with a lot of debt.

Len Jelinek, an analyst with iSuppli, a semiconductor research firm, points out that Motorola sold its semiconductor component business in 1999 to private equity firm Texas Pacific and that the unit, subsequently named ON Semiconductor, went public in 2000 with a large amount of debt as a result of the leveraged buyout.

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Shares of ON Semiconductor (ONNN: Research, Estimates) have plunged 73 percent since the IPO. "ON Semiconductor was debt laden and it has struggled. I can't imagine how Motorola's semiconductor business could be a force if it is debt laden as well," Jelinek said.

To that end, Ryan argues that the semiconductor business shouldn't be worth more than 1 times sales estimates for this year, or about $5 billion, if Motorola decides to dump a lot of debt on the company.

Motorola's semiconductor business will face other challenges as well, namely broadening its customer base. Last year, the biggest customer of Motorola's chip business was...Motorola, accounting for 24 percent of sales.

"Motorola is clearly not at the leading edge of chip technology," Jelinek said. "And this company is going to need the ability to get business from other places than just Motorola."

Analysts quoted in this story do not own shares of Motorola and their firms have no investment banking relationships with the company.