Saturday, July 21, 2007

AP: Motorola's CEO Ed Zander under Fire as Grassroots Ouster Campaign Gets Underway

An article from last week's AP:

CHICAGO: After beating back a proxy fight from billionaire financier Carl Icahn, the chief executive and chairman of Motorola Inc. is under attack again.

On the heels of this week's warning of worse-than-expected earnings, Ed Zander found himself the target of an activist-backed effort to reform the once-venerable cell phone maker.

This time, the campaign to boot Zander, along with four other board members, is led by a group of small investors and includes an online petition, blog and five-minute video manifesto.

"Enough is enough and it's time for a change," said Eric Jackson, a Naples, Florida, management consultant who owns 134 Motorola shares and launched the grass roots initiative called "Plan B" on Monday. "There's the substance of what the CEO does, but there's also the symbolism. And I think the problem is that he's just not that inspiring."

So far, about 70 shareholders who claim to represent about 400,000 shares have signed on, though there's no way to verify the group's holdings. A video outlining the plan has received more than 1,400 views on YouTube.

Jackson launched a similar campaign earlier in the year, attacking former Yahoo Inc. CEO Terry Semel, who stepped down last month.

The anti-Zander sentiment may be growing on Wall Street, too.

"If you don't see any improvement over the next couple of quarters, I think his days are numbered," said Morningstar analyst John Slack. "I think the catcalls and the cries for him to step down, or be fired, are only going to grow from here out."

A company spokeswoman declined to comment specifically on Jackson's campaign.

"Ed and the senior management team are continuing to work to restore the profitability and performance that we expect from the mobile devices business," spokeswoman Jennifer Erickson said Thursday.

Zander, 60, took the helm of the Schaumburg-based company in 2004.

Since then, he's overseen Motorola's meteoric rise on the success of its Razr phone along with its stunning decline that began last fall when aggressive attempts to increase market share by lowering phone prices began to backfire and hurt profit margins

On Wednesday, Motorola acknowledged its struggling cell phone business — its biggest — will be unprofitable at least until 2008 and warned of a shortfall in second-quarter revenue due to weaker-than-expected handset sales. It also said it would post an operating loss because of poor results in cell-phone units in Asia and Europe.

The announcement that the company's cell phone business won't be back in the black until at least next year signals Motorola's turnaround efforts haven't gained traction despite assurances by Zander that the company would succeed.

Motorola has announced a series of reductions and a restructuring plan, but has pinned its hopes for a recovery on a new cell phone lineup, anchored by the Razr 2. That phone was to be introduced in Asia this month and elsewhere later in the summer.

Meanwhile, analysts predicted Thursday that Samsung Electronics Co. would eclipse Motorola for the No. 2 position in world handset sales and market share during the quarter.

Motorola said it expects to ship about 35 million to 36 million handsets in the second quarter and analysts forecast Samsung will ship more than 37 million handsets. Meanwhile, JPMorgan estimates put Samsung in the No. 2 spot with 13.6 percent of the market, compared with
Motorola's 12.8 percent. Both trail Nokia Corp.

Standard & Poor's put Motorola's long-term ratings on watch Thursday — short of a downgrade but a move signifying negative implications, the ratings agency said.

"It's going to take some time for Motorola to turn things around considering competition has only increased in recent months," RBC Capital Markets analyst Mark Sue said in a note to investors Thursday. The company, he said, "sorely needs a hit product to turn things around."
Motorola shares, already down 13 percent in 2007, rose 13 cents Thursday to $18.08 in trading.

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