Carl Icahn, the veteran activist investor, on Tuesday chose Motorola as his latest target, sending the company’s share price higher and increasing pressure on management at the struggling US telecommunications equipment maker.
On the last day available to submit a proxy challenge for 2007, Mr Icahn informed Motorola that he would seek a board seat at the Illinois-based company and indicated he would push for a more aggressive share buy-back plan. The move, which comes a year after Mr Icahn waged a high-profile battle to break up Time Warner, follows a sharp drop in valuation at Motorola.
The handset maker run by Ed Zander has seen its shares fall about 30 per cent since mid-October and suffered a poor fourth quarter after a mobile phone price war broke out during the holiday shopping season.
Motorola’s response on January 19 was to cut 3,500 jobs, or about 5 per cent of its workforce, in a move that is expected to save the company $400m over two years.
Mr Icahn, a New York billionaire who owns a 1.39 per cent stake in Motorola, or 33.5m shares, did not clarify what his complaints were. However, he told Reuters: “I think they should do a big buy-back. They said their stock is very cheap and I happen to agree. I’m buying their stock and they should be buying their stock.”
News of his efforts prompted Motorola shares to jump 6.9 per cent to close at $19.58 on Tuesday.
Since the 1980s, Mr Icahn has been campaigning against managements and boards of US and international corporations with mixed results. In his struggle against Time Warner he was unable to force a break-up of the media conglomerate.
However, he did push Dick Parsons, its chief executive, to expand Time Warner’s share buy-back programme, sell assets and reduce costs, all of which contributed to a sharp rise in the media group’s shares
Over the past few years, Motorola has raised its dividend and announced plans for $8.5bn in stock buy-backs. The company, which began 2007 with adjusted net cash of $6.9bn, has also streamlined its business from six to three divisions. Most significantly, Motorola spun-off its semiconductor unit as Freescale, a public company which was last year acquired by private equity firms in a $17bn deal.
Motorola’s biggest shareholders are all institutional investors, with Barclays Global Investors the biggest with a 6.9 per cent stake.