I have data on five point likert scale ranging from 1= Strongly Disagree to 5= Strongly Agree. Is it possible to transform this data into categorical questions? Is that possible/ reasonable?
Yes you can do so in SPSS easily. Just go to Transform, Visual Binning and convert scale data to categorical. Is it reasonable to do so depends on the purpose for which you are doing this. If you are trying to categorize widely spread data then yes, it is preferable to categorize it to make better sense of it. For example it is advisable to group variable Age into categories 20-25, 26-30 etc. for presentation purpose otherwise presenting age spread from 20 years to 70 years will be hard to interpret.
You can easily transform your 5-point rating scales into, say, binary dummy variables. For example, 1,2 become 1 (agree) otherwise 0 (not agree)
Whether that's a good idea depends on your question. You are certainly losing information with such a transformation (5 levels down to 2 levels). But if you have good reason to believe that respondents are not using all of the scale range, or you are only interested in whether a response is agreement or not, then it should be fine.
As far I understand, you are trying to convert 1-5 scale data into another categorical variable. It is already categorical with 5 categories but you can collapse some levels. What is the reason for doing that?