Tuesday, March 25, 2008

Chicago Tribune: Icahn pressures Motorola

Suit seeks documents about hiring, strategy

By Wailin Wong Tribune reporter

March 25, 2008

Activist investor Carl Icahn cranked up the pressure on Motorola Inc. on Monday, suing the company to try to gain access to internal documents ahead of a May showdown over board seats.

Icahn, who owns just over 6 percent of Motorola, said he wants the Schaumburg-based telecommunications equipment-maker to provide records relating to the hiring of senior executives and corporate strategy, especially as it relates to its mobile devices business.

Motorola spokeswoman Jennifer Erickson said in an e-mailed statement the company hasn't received a copy of Icahn's lawsuit, which was filed in Delaware Chancery Court.

Icahn and the company are preparing for their second proxy showdown at Motorola's annual meeting in May. Icahn is running a slate of four candidates for the board, including Keith Meister, chief executive of Icahn Enterprises LP. The others are Frank Biondi Jr., former CEO of Viacom Inc.; William Hambrecht, CEO of investment bank W.R. Hambrecht & Co.; and Lionel Kimerling, a semiconductor expert at the Massachusetts Institute of Technology.

In an interview Monday with the Tribune, Icahn said Motorola wants "to keep [Meister] off for no real reason" and described the current board as a "fraternity," echoing the language he used in a letter to shareholders released Monday.

Icahn and Motorola have tangled repeatedly over his access to internal documents. Erickson said Motorola offered to provide records under a "customary confidentiality agreement, but Mr. Icahn chose not to avail himself of that opportunity and instead seeks to create further unnecessary distraction."

Earlier in March, Icahn asked for the documents, and Motorola's lawyers sent him a written rejection, prompting him to file suit. According to a copy of the letter, the company found his request to be "egregiously overbroad."

Icahn said in his Monday statement he wants to view documents related to Motorola's financial performance, personal use of company aircraft and the potential spinoff of its handset division. Icahn has long pressed for a breakup of Motorola, saying the value of the company would rise significantly if the cell phone unit were a separate company.

"You'd spin it off and it would certainly keep the brand," Icahn told the Tribune. "It's a great brand with great intellectual property. It just needs someone to run it properly."

Motorola said in late January it was considering shedding its handset division. In the meantime, Chief Executive Greg Brown has taken direct control of the ailing business and replaced many senior managers.

But Icahn expressed impatience at the pace of change and improvement."Now is the time for action, not more indecision," he wrote in his letter to shareholders. "It is therefore especially vital that we have the right people on the board to drive, guide and monitor this restructuring and spin off process through to completion."

Icahn chastised Motorola's board and management for "empty promises," saying they've only let the handset division deteriorate further despite pledging a turnaround at the 2007 annual meeting. In the last year, Motorola's stock has plunged 45 percent. It hit a new 52-week low of $8.98 per share Thursday. On Monday, Motorola's shares closed at $9.69, up 44 cents.

Eric Jackson, who heads a Florida-based Ironfire Capital, an activist investment firm and organized a grass-roots shareholder campaign against Motorola last year, said the plummet in the company's stock price to below $10 "was the tipping point for a lot of shareholders in terms of being frustrated."

"We're supportive of Mr. Icahn and the kinds of changes he's offering," Jackson said. "I'd be in favor of any significant activist shareholder at this stage, compared to just signing a blank check over to Greg Brown."


Sphere: Related Content
blog comments powered by Disqus