Monday, July 09, 2007 Deal Journal: A New Thorn in Motorola's Side

From today's Deal Journal in the by Li Yuan:

Posted by Dana Cimilluca

Deal Journal colleague Li Yuan reports on the latest “activist” shareholder campaign at Motorola.

Eric Jackson owns just 130 shares of Motorola stock, but the activist investor and blogger has got big plans for the ailing mobile phone company.

Jackson on Monday afternoon launched an online campaign called “A ‘Plan B’ for Motorola,” urging the replacement of Ed Zander as CEO and chairman immediately — as well as four of 10 other board members, among other initiatives. He also posted videos on YouTube and put up a Web page where shareholders can “pledge” their shares to support his plan.

It would be easy to ignore Jackson, if he hadn’t helped balloon an investor revolt at Yahoo ahead of last month’s resignation of former CEO Terry Semel. Jackson owned just 96 Yahoo shares, but his barrage of blog posts and online videos quickly got him attention. He launched the campaign in January, agitating for the ouster Semel and some board members. About 100 Yahoo shareholders pledged roughly two million shares on to support him (representing about 0.2% of Yahoo outstanding shares).

Jackson is among a new breed of investors who are savvy about the grass-roots power of the Internet and use it to make activism no longer a game reserved only for wealthy financiers. The goal of his Motorola campaign is to find a solution “which will deliver extraordinary value to Motorola shareholders” and “put Motorola on a path back to its rightful place as the worldwide leader in communications,” he writes in the proposal.

It marks the second time this year Zander and Motorola’s board of directors have had to fend off an activist onslaught. Billionaire financier Carl Icahn lost a proxy fight in May to get a seat on Motorola’s board.

Motorola has faltered the past two quarters due to the lack of a successor to its hit Razr cellphone and declining margins in its handset division, which accounts for more than half of the company’s sales. The problems forced the company to report a loss in the first quarter and project a difficult year. The company also more than doubled its planned job reductions and cost cutting. A few analysts recently lowered their forecast for the second quarter, expecting weaker earnings than they had factored in before.

A Motorola spokeswoman declined to comment.

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