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Motorola said Monday Carl Icahn, the billionaire activist investor, had failed to win a seat on its board following a preliminary count of shareholder votes at its annual meeting.
However, Mr Icahn vowed to maintain the pressure he has exerted on the world’s second-largest mobile phone maker since spending $1.6bn to build a 2.9 per cent stake, reiterating his criticism of Ed Zander’s performance as chairman and chief executive.
He won applause from the small shareholders gathered at the Art Institute of Chicago with a call for the board to begin a search to replace Mr Zander in “three to four months” if the chief executive failed to deliver on his pledge to halt Motorola’s faltering performance in the handset market.
The weeks leading up to the annual meeting had seen a public spat between Mr Icahn and the Motorola board, which had rejected his call for a board seat and defended the company’s performance.
Mr Icahn appeared to accept defeat in remarks delivered to the meeting, citing opposition from some large institutional owners.
“The reason that I believe I’m going to lose is basically three or four large mutual funds,” he said, noting he did not have a replacement for Mr Zander in mind.
Motorola said the final tally of votes could take three weeks, but said in a brief statement on Monday night that it believed “stockholders have re-elected Motorola’s Board of Directors and did not elect Carl Icahn”.
Mr Icahn said little about how Motorola could be turned around, but repeated his call for greater accountability across corporate America as Mr Zander and Motorola’s board members sat stony-faced throughout.
Mr Icahn has dropped his initial demand that Motorola accelerate its share repurchase programme, acknowledging that the first priority is to fix the problems in the mobile phone division, which include tumbling margins and the lack of “blockbuster” products to replace the company’s ageing Razr handset.
But Mr Icahn, who built his reputation as a corporate raider in the 1980s, believes the Motorola board is “too passive” and failed to act quickly when it became apparent that the company had “stumbled badly.”
Motorola has highlighted Mr Icahn’s lack of experience in the sector and questioned whether the 71-year-old investor turned shareholder-activist had the time to devote to the board. Mr Icahn, an infrequent visitor to Chicago, revealed he had spent the morning of the meeting on a sightseeing boat tour.
Among the institutional investors that openly supported the Motorola board during the three-month proxy battle are: MFP Investors and the California Public Employees’ Retirement System (Calpers), the largest US public pension fund with 13.7m Motorola shares, which announced its position on its website on Monday.
But other institutional shareholders, including Legg Mason’s ClearBridge Advisors and Kelmoore Investment, had said they would vote for Mr Icahn.
New York-based ClearBridge owns 2.3 per cent of the shares, making it the biggest shareholder to publicly confirm its support for Mr Icahn.
Since it announced a $181m first quarter loss because of the problems in its core mobile phone division, Mr Zander has refocused the company, putting profits ahead of market share gains, and announced measures including cost-cutting aimed at returning the unit to profitability by the fourth quarter.
Motorola’s shares, which fell 9 per cent last year, have lost 1.3 per cent since Mr Icahn announced his desire to join the board in January.