Icahn criticises ‘passive’ Motorola board
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Carl Icahn, the billionaire Wall Street investor seeking a seat on Motorola’s board, stepped up the pressure on the US mobile phone group on Friday, describing the current board as “passive and reactive” and warning that its top priority should be “to hold management accountable for fixing Motorola’s current operational problems”.
Mr Icahn who, with affiliates, has built up a 2.9 per cent stake in Motorola, set out his boardroom challenge in a letter to investors that also makes it clear he has backed away from an earlier demand that Motorola use the bulk of it surplus cash to accelerate its share buy-back programme.
“Until our operational problems are corrected, buy-backs and other transactions that might have looked appropriate earlier need to take a back seat,” he said.
Mr Icahn and his affiliates have so far acquired 69.1m shares in the electronics group whose problems emerged in 2006 fourth quarter when margins and profits plunged mainly because of a mobile phone price war.
“I am concerned, as I know many of you are, with certain recent events at Motorola, such as the surprise fourth-quarter drop in earnings for its Mobile Devices segment and the recently announced expectations for disappointing results throughout 2007,” said Mr Icahn in the letter.
Pointedly he added, “an engaged board of directors should have been able to help Motorola avoid the missteps that currently plague its business, or at least to have identified and addressed those earlier”.
Mr Icahn began campaigning for a board seat in January and started a proxy fight last month because Motorola wouldn’t endorse his nomination. “I fail to understand why, during these difficult times when they could obviously potentially benefit from a fresh perspective, Motorola refuses to put me, a large shareholder with significant business experience, on the Board,” he said.
Since January, Motorola’s problems have continued to mount as the scale of the problems facing the world’s number two mobile phone maker have become apparent.
In February Ron Garriques, head of Motorola’s core mobile unit resigned to join Dell and late last month Ed Zander, Motorola’s increasingly beleaguered chief executive, was forced to admit that 2007 profit and sales would be ”substantially” worse than anticipated. Mr Zander also warned investors that the company will post a loss in the first quarter.
Meanwhile, Motorola’s stock has fallen to its lowest since June 2005. The company has lost about a third of its market value, or $22bn.
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