Saturday, July 21, 2007

Naples Daily News: After Taking Aim at Yahoo, Naples Activist Sets Sights on Motorola

From last week's Naples Daily News by Laura Layden:

It’s goodbye Yahoo! and Hello Moto.

After leading a high-profile campaign to oust Terry Semel at Yahoo!, Eric Jackson, a small activist investor with a Naples address, is turning his attention to the world’s No. 2 maker of cell phones.

Jackson is calling for change at Motorola, which has seen declining profits with increased competition and greater demand for cheaper phones.

On Tuesday, Jackson officially launched his campaign, announcing it on his blog and through a YouTube video. He’s using the same strategy as he did for Yahoo!, drumming up support through the Internet.

Observers credited Jackson for taking down Semel, who stepped aside as Yahoo!’s boss last month. It was part of his "Plan B" for the company. Using only the Internet, he rallied 100 individual investors, owning 2.1 million shares, behind the plan.

He could be even more successful with Motorola after attracting so much attention from his first campaign. National publications such as The Wall Street Journal and New York Times picked up on his story. He appeared on CNBC and Bloomberg Television.

Jackson recently bought 134 shares in Motorola. Less than 24 hours after announcing his campaign for change, he had about $350,000 worth of stock pledged to it.

"Our track record is more well-known now," he said. "Hopefully we’ll get some institutions to sign onto the group."

He has a draft Plan B for Motorola, which he’s sent to the company. He expects to revise it based on what he hears from other disgruntled investors in what he describes as a "79-year-old American institution."

"The plan is for the next month to hopefully get as much input as possible. Then after that we will take the best ideas, develop a final version of the plan and will send it to the board of directors by early August," said Jackson, 35, a business and management consultant and president and CEO of Jackson Leadership Systems Inc. in Naples.

Then Jackson will request a meeting with board members.

Here’s what he proposes in his draft plan:

• Replace Ed Zander as chairman and CEO immediately.

• Replace Judy Lewent, Nicolas Negroponte, Samuel Scott III, and John White on Motorola’s
board of directors.

• Appoint Edward Lampert of ESL Investments Inc. to Motorola’s board and others with "deep communications experience." Lampert recently disclosed he owned stock in the company.

• Outline the long-term vision and strategy for Motorola.

• Appoint a permanent head of the mobile devices business.

"I’ve been following the company for the past seven years," Jackson said. "I used to work for a software company in which we partnered and competed against Motorola, and I’ve followed Ed Zander since he joined the company 3 1/2 years ago."

In his blog, he points out that Nokia and the S&P 500 have exceeded Motorola’s shareholder returns by three times since Zander came aboard and that many suspect Motorola will drop from No. 2 to No. 3 in worldwide handset sales this year.

"The results from the past three quarters have been underwhelming, as the company sank to negative margins. The Q2 (second quarter) numbers are expected to also be weak," Jackson wrote.

He also raised a concern about a statement made by Zander that he loved his job, but hated his customers when answering a question about why Motorola’s carrier customers were discounting Motorola’s phones.

Frank Gilroy, a former Motorola employee, has highlighted Jackson’s campaign on his own blog, where he wrote an open letter to Zander in June criticizing a decision to close the Urbana-Champaign (Ill.) Design Center and lay off 183 of the "smartest people" he’s worked with in his "entire life."

In a post on Jackson’s blog, Gilroy said he’s unloaded his stock but that he’ll do whatever he can to help the campaign.

"The thing that burns me ... is that even if Ed vacates his position he’ll still be entitled to some sort of huge ‘golden parachute’ kind of package," he wrote.

Jackson’s campaign comes after billionaire investor Carl Icahn lost a proxy fight against
Motorola and failed to receive enough votes to get elected to the company’s board.

Icahn used his bid to get on Motorola’s board to criticize Zander’s leadership. Since he lost that battle, the company has released new phones, which it expects to boost earnings. But the response to the new phones from customers and from Wall Street has been "very lukewarm," Jackson said.

"To think that those phones are going to lead a turnaround I don’t think is realistic," he said. "And if that is what the whole turnaround strategy for the company is predicated on, then I think the company is going to have some real problems."

He added, "I thought now is the time to put the argument forward that some more aggressive changes need to be taken with the company."

He hopes to find more success than Icahn.

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Anonymous said...

While we are on the subject of change of CEO and Board Members in Motorola, we should note that Motorola has gone through 4 CEO changes in the last 14 years. They were the 1993, 1996, 1997 and 2003 changes. None appear to have had a long lasting positive impact on the company. Pat Canavan the current Senior VP for Global Governance appears to have been the chief architect and the consultant to the board's nominating committee in all these changes. He has also advised on nomination of new board members and has played a key role in the selection of other senior leaders of Motorola over the past 2 decades. It begs the question "why all the CEO's and the senior leaders that have gone through the revolving doors have failed to arrest the decline in Motorola's fortune?" One possible answer is that while the CEO's have changed the "CEO Cutter" has remained the same. Isn't it about time to have a change of the CEO Cutter and let someone else have a go?

Anonymous said...

Just in case anyone is interested, the original blog post that was quoted in this article is available here.

Eric Jackson said...

Great point, Anon. You're right on.

adam hartung said...

Mr. Zander is not the problem at Motorola. He has made significant improvement in a cantakerous bureaucracy, while fighting off a vulture in Icahn. What's needed at Motorola is more of what Zander did in his first 12 months - and definitely not a return to the old (failing) Motorola or the draconian proposals of Icahn. Read more at