Shares in Motorola rose in early trading on Thursday after the world’s second largest mobile phone maker revealed that Carl Icahn, the billionaire Wall Street raider, was seeking to lift his stake in the company to about 6 per cent by acquiring another $2bn in stock.
If completed, the proposed stock purchase would lift the stake in Motorola acquired last month by Mr Icahn from 1.6 per cent, and turn him into the company’s second biggest investor behind Barclays Global Investors. Barclays had a 6.82 per cent stake in Motorola at the end of December.
Mr Icahn’s demand that Motorola use the bulk of its $11.6bn in cash to accelerate share buybacks, has helped prop up its share price in the wake of a series of setbacks.
The company reported weak financial results earlier this year reflecting a fierce mobile phone price war and the lack of blockbuster products to replace its ageing Razr phone.
Profit margins in Motorola’s core phone division shrank to 4.4 per cent in the fourth quarter from almost 12 percent in the preceding three months as the company slashed prices in order to retain market share and remain competitive with Finland’s Nokia, the world’s largest mobile phone maker.
Late on Wednesday, Motorola said Mr Icahn and Icahn Partners had each filed for approval to buy between $119.7m and $500m in Motorola stock. In addition, Motorola said it had received a notice under the Hart-Scott-Rodino antitrust act that two other Icahn entities had also each filing to buy more than $500m worth of its shares.
If all four entities buy $500m of stock each, it would lift the Icahn stake to around 6 per cent.
Last year Mr Icahn agreed to end a proxy battle against Time Warner in exchange for concessions from Dick Parsons, Time Warner’s chief executive, including an increased stock buyback plan.
■ Nortel Networks, the Canadian telecommunications equipment maker, surprised investors on Thursday with yet another restatement of earnings, but said its fourth-quarter results won’t be affected by the move.
Nortel has struggled to shore up its profitability and investor confidence following a succession of restatements related to accounting problems, said it will delay the filing of its 2006 annual report until later this month and will restate results for 2004, 2005 and the first nine months 2006.