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Motorola challenged over mobile device business

by Scott Bicheno on 25 March 2008, 17:00

Tags: Motorola (NYSE:MSI)

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Goodbye Moto?

Veteran corporate raider – sorry, shareholder activist – Carl Icahn is suing Motorola to obtain documents relating to the company’s struggling mobile device business.

He also wants to know more about the use of a corporate jet for personal reasons by senior executives and their families.

‘Over the past 12 months the statements and predictions of Motorola’s management and the board about Mobile Devices business have too often proved to be wrong,’ Icahn declared on Easter Monday.

‘We want to ascertain what the board could have done to assure stockholders that Motorola’s statements and predictions do not provide stockholders with an inaccurate perspective on the prospects for the mobile devices business.’

Only last month, Icahn told Time magazine, ‘I’m not looking to remove Motorola’s board.’ Now, however, Icahn’s lawsuit follows hot on the heels of an appeal to Motorola stockholders to vote for a new board at the annual stockholders meeting on 5th May.

Icahn’s nominees are former Viacom CEO Frank Bondi, W.R. Hambrecht & Co. founder and CEO William Hambrecht, MIT professor and semiconductor materials processing expert Lionel Kimberling, and Icahn Enterprises CEO Keith Meister.

Motorola’s directors beat back Icahn’s attempt to place his nominees on the board last year. They ‘made enough empty promises to convince stockholders to give them another chance to get it right,’ Icahn reminded shareholders. ‘What we got instead was a year of revolving-door executives, a leadership vacuum, and accelerating deterioration of Motorola's Mobile Devices unit.’

‘As we all are painfully aware,’ Icahn continued, ‘over the past 18 months, the market value of Motorola has dropped by over $37 billion. More than $17 per share of stockholder capital has vanished under the “guidance” and “leadership” of the current board.’

It seems hard to disagree. Motorola announced a net profit drop of 84 percent in the final quarter of 2007, due mainly to a 38 percent fall in mobile phones sales, while rivals Nokia and Samsung surged ahead.

Icahn’s fire is concentrated on new CEO Greg Brown, previously head of the mobile devices division. ‘What qualified Greg Brown to be the CEO?’ Icahn asked shareholders. ‘He certainly has no in-depth experience or knowledge concerning the mobile devices business, which was and is by far the major problem for Motorola.’

Oddly, Icahn’s solution is to spin off the mobile devices division, a step CEO Brown is known to favour.



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