Saturday, July 21, 2007

Chicago Sun-Times: Motorola Makes Cold Call

From last week's Chicago Sun-Times by Howard Wolinsky:

Motorola warned investors after the stock market closed Wednesday that it will post its second straight quarterly loss next week.

The ominous news comes on the tail of another investment activist calling for the resignation of Motorola Chairman Ed Zander.

The Schaumburg technology company said it expects a second-quarter loss of 2 to 4 cents a share, including charges stemming from previously announced job cuts. The company said second-quarter sales will be $8.6 billion to $8.7 billion. Originally, it forecast sales of a flat $9.4 billion.

The company blamed its shortfall on falling sales of its cell phones in Asia and Europe. Motorola said this will result in "a larger operating loss in the second quarter as compared to the first quarter. For the full year 2007, the company no longer expects the Mobile Device business to be profitable."

Motorola Wednesday named Stu Reed, executive vice president of Motorola's Integrated Supply Chain organization, to head the mobile devices unit. The job has been open since February when former unit head Ron Garriques abruptly joined Dell Computer.
Motorola's Connected Home Solutions and Networks & Enterprise businesses are expected to meet expectations.

Earnings results will be reported July 19.

Zander & Co. in May successfully fended off a proxy fight with billionaire investment activist Carl Icahn, who called for sweeping change at the company, including calling on the board to start looking at resumes to replace Zander.

This week, Eric Jackson -- a blogger, Motorola shareholder and president of Jackson Leadership Systems, a strategy and governance consulting firm -- called for Zander's head. Jackson made his presence felt last month when he claimed that some 100 Yahoo shareholders pledged 2 million shares in Jackson's campaign to oust CEO Terry Semel, who eventually was fired.

Jackson's "Plan B" to reform Motorola seemed to give Motorola's shares a boost. Shares closed at $17.95, up 33 cents, or 1.9 percent. Shares have ranged from $17.32 to $26.30 over the last year.

Jackson said, "There is little to get excited about with Motorola these days. Since January 2004, the month Ed Zander took over as the chairman and CEO, through today, Motorola has returned 13.5 percent to its shareholders. Nokia, the No. 1 mobile handset maker in the world, has returned 37.8 percent over the time period. The S&P 500 has returned 35.2 percent. Your returns as a shareholder would have been 3x if you had put your money in Nokia the month Ed Zander started."

In addition to Zander's head, Jackson would like to dump several board members who have little personally invested in the company. He urged that Icahn, who is experienced in turning around struggling companies, and some veterans with deep telecom industry knowledge be appointed to the board.

Jackson lays out his plan and invites shareholders to offer suggestions at the "Unofficial Motorola Wiki" at motorola.wikia.com/wiki/Main_Page.

As a result of the shakeup, Motorola postponed its annual July meeting with analysts until September.

In the shadow of the just-released Apple iPhone, Motorola has argued that consumers will be getting exciting new products, such as the soon-to-be-released RAZR2, the replacement of the hugely popular RAZR thin phone, and its new "media monster" phone.

But Jackson complained that the new line appears "to be so yesterday."

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1 comments:

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