Thursday, August 30, 2007

What Now, Yahoo!?

Several people have asked me in the last few weeks whether I'm still involved in a "campaign" against Yahoo! My "Plan B" activist effort against the Internet company started in early January and culminated in a substantial "against" vote, which was registered by shareholders at the June 12th annual meeting. The 3 Compensation Committee members all received at least 35% of votes cast against them. However, all other directors -- including benevolent co-founder and now CEO, Jerry Yang -- received 6 - 8% of votes cast against them.

These are historic negative votes. To put them in perspective, Michael Eisner -- at the height of his unpopularity, when Roy Disney campaigned against his reelection as Disney CEO -- received a 43% against vote. This led to his removal shortly thereafter.

Yahoo!'s vote also led to some changes, namely Terry Semel's move upstairs to Chairman - with Jerry taking over as CEO and Sue Decker assuming the role of President.

In some press accounts of my involvement with this result through the "Plan B" campaign, it was portrayed as a victory - and it was, of sorts (although I certainly don't take full credit for this result).

However, no one can look at Yahoo! and claim that all the work is done. Removing Terry Semel was point 1 of a 9 point "Plan B." They are endeavoring to reduce the overlapping divisions and closing underperforming groups. They have added one new highly qualified director, but the rest of the board remains the same.

I've been quiet publicly since the change in the leadership ranks announced June 18th - but, by no means do I consider my work done at Yahoo! as an activist investor. Anyone who pledged their YHOO shares towards our current count of 2.1 million shares can be assured that I am not going away.

I have communicated several times with Yahoo!'s management since the annual meeting. Although I can't disclose what was shared to me at past meetings I've had with Yahoo! management, I commend them for their open-mindedness in meeting with me and having an open and constructive dialogue around several continuing criticisms I have with the company.

This is a far cry from the response that I have received from Motorola's non-executive directors. I'm currently involved in a fervent battle to unlock shareholder value at that company and have proposed another "Plan B" with a different recipe to ail that once proud communications company. Though we have a significant number of shareholders behind us, a credible plan -- which looks even more credible as the days tick by and MOT's stock price continues to drift lower and under-perform Nokia's -- we received nothing more than a cursory form letter from one of Motorola's directors who declined to have a meeting.

Not so at Yahoo! For that, the company's leadership deserves kudos. As yesterday's reorg announcement came out in another painfully awkward way, the company has again drawn more complaints from the press -- some justifiable.

I'm not going to outline every beef I shared with Yahoo! I had the chance to speak to them on behalf of our supporters and they responded to each and every complaint that I laid out to them. Several of their responses I found comforting. Some, I frankly disagree with -- but they have their arguments and I have mine.

That said, here are three high-level recommendations which I suggested are critical for the company to address in the coming weeks:

1. The V Word - Vision. We need to know what the new Yahoo! will stand for. There have been hints at this in the last earnings call, but they need to hit us all over the head with it. In "Built to Last," the precursor to Jim Collins' "Good to Great", co-authored with Stanford GSB Prof JerryPorras, the authors used the term "Big Hairy Audacious Goals." Yahoo! needs to articulate what these will be - both internally and externally.

2. Renewing the Org Culture and Flattening the Org Structure. The company's culture needs to demand and reward performance - from all employees. Partly, this will happen through flattening the organization and pushing out decision-making aggressively. I don't think it's a bad thing that there has been turnover recently at the company. It's never easy when people leave - voluntarily or forced. Hopefully, the changes will be done soon and the organization can move forward with the new group/structure in place.

3. Renew the Board. After the high "against" votes that I referred to earlier, it's a must. With change comes opportunity. Bringing in new blood with industry experience and diverse views will make Yahoo!'s management team stronger and this will trickle down. More youth would be a plus too. After all, by any standard, Yahoo! is still a young company competing with even younger companies. If their directors don't have Facebook pages, do they really understand the world in which Yahoo! is operating in? (Bravo, Ed Kozel.)

I am as energized as ever about Yahoo!'s future prospects, but I am a realist and see the good and the bad. I will continue to speak out on behalf of Yahoo! shareholders who believe this company can be better. We will speak with the voice of a friend who is respectful - but a friend who isn't afraid to be honest with you when you make a mistake.

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Friday, August 24, 2007

Why Has Motorola Never Tried to Hire Away Nokia Talent?

This morning, I spoke with someone whose firm is one of the largest holders of Motorola shares in the world.

Of course, we were discussing the points of our group's "Plan B" and the fact that the Motorola's non-executive directors had refused to meet with our group to discuss the plan -- "a bad sign," according to this person.

The person also raised a very good question, which is worth considering:

"With Nokia doing so well compared to Motorola, I've always wondered why they haven't tried more aggressively to hire talent away from Nokia? In the areas of platform strategy, marketing, and supply chain, it seems like Motorola really could really benefit from some expertise and why not take it away from your top competitor?"

Good question. Maybe Motorola will choose to address this at their Financial Analyst Meeting on September 7th. We'll be watching.

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1-Year Chart: Motorola vs. Nokia

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Thursday, August 23, 2007

Reuters: Motorola's woes still benefit competitors: Gartner

From Reuters:

Thu Aug 23, 2007 12:12 AM BST

HELSINKI (Reuters) - Mobile phone maker Motorola (MOT.N: Quote, Profile , Research) continued to suffer from weak demand in April-July due to its old phone models, giving competitors a chance to gain market share, research firm Gartner said on Thursday.

Gartner said 270.9 million phones were sold in April-June, up 17.4 percent year-on-year, boosted by 40.7 percent growth in the Asia-Pacific region. Western Europe and North America saw 11 percent and 7 percent annual growth, respectively.

But it cut its forecast for the global handset sales in 2007 to 1.13 billion phones from the 1.15
billion it forecast in May because April-June sales were not as strong as it expected. The figure compares with an average market growth forecast of 1.11 million in a Reuters poll of analysts published at the end of July.

Market leader Nokia (NOK1V.HE: Quote, Profile , Research) sold almost 99.95 million phones in the second quarter, for a 36.9 percent market share worldwide compared with 33.7 percent a year ago.

Carolina Milanesi, research director for mobile devices at Gartner, expects Nokia to continue to gain market share in the second half because Motorola is not as aggressive pushing cheaper mobile phones that sell well in emerging markets.

Although Motorola continued to suffer from weak demand for its older phone models, it stayed ahead of South Korea's Samsung Electronics Co Ltd (005930.KS: Quote, Profile , Research).

Motorola's sold 39.5 million phones and had a market share of 14.6 percent, compared with 21.9 percent a year ago. Samsung's market share was 13.4 percent.

Milanesi said she was eager to see how Motorola and Samsung would perform in the second half of the year.

"Their volumes and market shares are very, very close. It could well be that Samsung overtakes Motorola if it continues to be weak."

But Milanesi said it would take some time for Motorola to rebuild its phone portfolio.

"I am not expecting to see Motorola with 20 percent market share before mid-2008," she added.

Gartner said Motorola burned in the second quarter inventories it gained in the first quarter, while Samsung pushed too many phones in to the sales channel in the second quarter and gained inventories.

A wider selection of phones boosted Sony Ericsson's (6758.T: Quote, NEWS , Research)(ERICb.ST: Quote, Profile , Research) market share to 9 percent in the quarter from 6.6 percent a year ago, while LG Electronics Inc (066570.KS: Quote, Profile , Research) had 6.8 percent share of the market, up from 6.3 percent a year ago.

"The gap between LG and Sony Ericsson is still there," Milanesi added.

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Wednesday, August 22, 2007

Two Activist Targets, Two Class Action Lawsuits which Followed

It might be pure coincidence but Motorola, like Yahoo! earlier this year, has become the target of a series of shareholder class-action lawsuits in the months after we launched our "Plan B" campaigns aimed at both.

With these actions, one law firm starts and others immediately seem to follow. The charges in both cases have been that management has known that company was heading for a fall last year and yet said things were ok to shareholders.

I haven't been part of either set of cases. These are headaches you don't need when you are trying to turn around a company. But there is a simple solution for this problem, if you're running a company: do everything in your power to be caught in such a position where you make yourself a target.

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FT: Motorola Loses Market Share

From the Financial Times:

By Maija Palmer in London and Paul Taylor in New York

Published: August 22 2007 20:54 Last updated: August 22 2007 20:54

Ed Zander could come under renewed pressure to step down as chief executive of Motorola on Thursday as new figures showed the handset maker lost more than seven percentage points of market share during the second quarter.

Motorola narrowly maintained its position as second-largest handset manufacturer – but its share of global sales fell to 14.6 per cent, from 21.9 per cent a year ago, according to estimates by Gartner, a research company.

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Sunday, August 19, 2007

The Age: Good governance not so great for shareholders

From Australia's The Age:

Leon Gettler

August 18, 2007

CORPORATE governance best practice might be desirable but it's not necessarily better for shareholders.

Management expert Sydney Finkelstein said there was no evidence to show that independent directors and separating the roles of chairmen and chief executives delivered results.

"It makes no difference," Professor Finkelstein said. "Even though intuitively we all wish it, but the data is quite clear on that.

"I see those as simplistic answers to corporate governance, and the nature of business is such that we often look for those simplistic solutions. The tougher solutions really relate to doing the assessment and understanding what's going on with the boards of directors in terms of their knowledge about what's going on in the organisation and the extent to which they can work effectively as a group," he said.

"It's good to have independence and it's good to have separation of the chair and CEO but don't expect those things to make a difference in terms of financial performance.

"The typical things that the so-called corporate governance experts look at have no impact on the bottom line in study after study.

"The research is quite clear. It doesn't make a difference. There are more important things than that and the more important things are the way a team in the board of directors works together, interacts and the extent to which board members are open-minded."

Professor Finkelstein, who teaches at Dartmouth College in the US, is regarded as an expert on systems that drive corporate failure. He has just been appointed to the American Academy of Management Hall of Fame.

His 2003 book, Why Smart Executives Fail, identifies blind spots and patterns of behaviour that unleash the storms of corporate pathology — flawed executive thinking and delusional attitudes that stop the company from reality-testing; breakdowns in communication systems that stop important information from getting through; chief executives convinced of their personal pre-eminence and systems that prevent the organisation from correcting its course.

Apart from teaching, he has developed diagnostic tools to assess the health of organisations.
He works with Canadian-based company Jackson Leadership Systems and has entered a joint venture with Australian board advisory firm Pro:Ned.

He said there were four reasons why companies failed.

First, was an inability to focus on the right strategy.

The second involved the company's culture. This was particularly true for companies that had once been very successful, and had been unable to move on when markets changed.

Third, companies ran into trouble when there was a breakdown in their communication and information systems.

Finally, when there was a breakdown in leadership, particularly arrogance and a lack of open-mindedness.

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Friday, August 17, 2007

Next Steps for "Plan B": Motorola's Status Quo is an Untenable Position

On July 9th, we launched our campaign through the Web for a "Plan B" for Motorola. We made the case then, and more recently in the finalized version of the plan, that the company needs to set a new course to benefit employees, customers, and shareholders.

Earlier this week, I received a letter from one of the non-executive members of Motorola's Board -- in response to our "Plan B" and my request for a meeting to discuss the matter -- stating that they will continue to take actions which they feel are in the best interests of Motorola shareholders. Full stop. No mention was made of a meeting.

I followed up by calling Mr. Dean Lindroth, head of Motorola's Investor Relations, yesterday. I alerted him of the board's oversight of my request for a meeting. He told me that he would pass along my comments to the board's secretary.

Man of his word, he did. And he also called me back today to confirm that the board's secretary and the board communicated the message they wanted to communicate in their letter. There was no oversight of my request - they simply (in my words) ignored my request.

We believe the current status quo position of Motorola is untenable. We believe change is needed and we will continue to argue for that.

From July 10th (the day after launching our campaign) through today, Motorola shareholders have suffered a decline of over 8%. The S&P500 has also dropped amidst the recent market downdraft, but only by 5.5% since July 10th. Nokia - the world's #1 handset maker - is up 1.2% during this time.

We will continue to work on behalf of all Motorola shareholders to reverse this trend - and return this company to its formerly strong leadership position. Onwards and upwards.

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Thursday, August 16, 2007

Tendances Trends: le CEO Ed Zander sur un siège éjectable

12/07/2007 18:07

Les résultats de Motorola sont catastrophiques : - 21 % pour le 2e trimestre, loin des 9,4 milliards prévus. Ed Zander pourrait y perdre son poste de CEO. Le talent d'un actionnaire activiste féru de Web 2.0 fera peut-être le reste.
Ed Zander, CEO de Motorola, a peut-être déçu investisseurs et analystes pour la dernière fois. Son groupe a enregistré des ventes ne dépassant pas 8,7 milliards de dollars au 2e trimestre, en chute de 21 %. On est bien loin des 9,4 milliards prévus en avril dernier par le patron.
Les malheurs d'une entreprise ne sont pas forcément à mettre sur le dos de son dirigeant. Certes, mais tous les regards se tournent malgré tout vers Ed Zander. A 60 ans, ce natif de Brooklyn pourrait laisser entrer du «sang neuf» dans l'entreprise. Au prix de son poste.
«Il a accompli un piètre travail dans la recherche des successeurs du Razr (Ndlr, modèle phare sorti en 2004) et n'a pas développé de stratégie pour que Motorola retrouve son lustre d'antan, assène Pablo Perez-Fernandez, analyste chez Global Crown Capital, cité par Bloomberg. Sa seule idée fut de réduire les coûts.»
Le conseil d'administration de Motorola pourrait «lâcher» Zander
Motorola a inventé le téléphone sans fil et dominé le secteur. Où en est-il aujourd'hui ? Sa part de marché a chuté à 18 %, loin derrière les 36,2 % du finlandais Nokia. Et son cours de Bourse a abandonné 13 % depuis le début de l'année.
Son plan de relance prévoit la perte de 7.500 emplois et des coûts allégés de 1 milliard de dollars. Insuffisant pour beaucoup d'investisseurs. Parmi eux : Carl Icahn. Le milliardaire a tenté, en mai dernier, d'obtenir un siège au conseil d'administration de Motorola. En vain : à l'époque, le board avait fait front pour défendre son CEO face aux critiques de l'homme d'affaires.
Vu les abysses creusés depuis des mois par le chiffre d'affaires, le conseil d'administration pourrait changer d'avis et «lâcher» Ed Zander. D'autant qu'un nouvel élément est apparu juste avant la publication des résultats. Son nom ? Eric Jackson.
Le patron de Motorola «tué» une 2e fois par un petit actionnaire
Eric Jackson est un tout petit actionnaire de Motorola : il détient à peine 130 actions. Mais il est un «investisseur activiste» et un «bloggeur» invétéré. Il aime le Web 2.0 et sait s'en servir à son profit.
Ce lundi, il a entamé une campagne en ligne baptisée «A Plan B for Motorola». Il y demande le remplacement immédiat d'Ed Zander et de quatre autres membres du board. Il a également placé des vidéos sur YouTube et monté un site Internet où les actionnaires peuvent «placer» leurs titres afin de soutenir son action. 24 heures plus tard, il avait déjà «rassemblé» 47.000 titres d'une vingtaine d'actionnaires de Motorola.

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Chicago Daily Herald: Motorola rebuffs dissident investor

Daily Herald Business Writer
Posted Thursday, August 16, 2007 in the Chicago Daily Herald

A Florida-based consultant said Wednesday he’ll continue his campaign to oust Motorola Chief Executive Ed Zander, despite what he called a brush-off from the Schaumburg company’s board.

Eric Jackson, president of Jackson Leadership Systems Inc., a governance consulting firm in Naples, Fla., said he has about 130 shareholders with collectively about 600,000 Motorola shares who support his plan to turn around the beleaguered company.

He submitted his plan to some board members and sought a meeting with them. Instead, he said he received a brief letter from the board on Wednesday.

Motorola executives have said they support Zander, and the board has not been looking to replace him. Calls and e-mails to Motorola were not returned Wednesday.

“I am now distributing this (his plan) to all the large shareholders I’ve been in touch with for the past month and am using this to call for more aggressive actions on the part of shareholders seeking change,” Jackson said.

Jackson, who owns about 100 Motorola shares, previously campaigned against former Yahoo CEO Terry Semel, who resigned under fire a few months ago. Jackson included videos about Semel on YouTube and a page on as part of that campaign. Jackson started a campaign against Zander after the company’s profits and global market share shrunk, more layoffs were announced and share value eroded.

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Wednesday, August 15, 2007

The Official Motorola Response to "Plan B"

Perhaps it should have been expected. But, 2.5 weeks after receiving our letter representing 130 Motorola shareholders with a combined ownership stake of 600,000 shares which detailed a "Plan B" for the company, we received a 4 sentence brush-off response from the board.

It was sent by regular mail.

Here is the Motorola response:

August 13, 2007

Dear Mr. Jackson:

Thank you for your letter dated July 30, 2007 to the non-executive members of the Board of Directors of Motorola. We appreciate your sharing with us your views concerning the issues raised in your letter. As a Board we regularly review Motorola’s performance, strategy and governance and make decisions based upon what we believe is in the best interests of the Company and its stockholders. We are actively engaged, and we have been and will continue to be proactive in implementing changes that we believe will enhance value for all Motorola stockholders.

Douglas A. Warner III
Chairman, Governance and Nominating Committee

In our letter to the non-executive members of the Board, we specifically asked for a meeting to further discuss our ideas in "Plan B":

"I request to meet with you at your earliest possible convenience to discuss our plan and the merits of implementing it. We must move past the mistakes of the past and take the steps now to make a better Motorola."

There was no mention of this in their response. I've recontacted Dean Lindroth to express my displeasure with this position and restated our desire as a shareholder group to meet the non-executive members of the Board. You can reach Mr. Lindroth directly to express your views at .

For all Motorola shareholders, the Board's response is disappointing. It says: "We know what we're doing. Scram."

We beg to differ. The company's results are there for all to see. There has been no substantive argument put forward by them as to how what their actions are going to be beneficial to shareholders. We have. The burden of proof here should be on the Company's Board and Management - not its shareholders.

They want us to go away and be quiet. We won't.

We believe solutions to major organizational problems come through open dialogue with key stakeholders - not by closing ranks, eschewing others with alternative views, and pretending that shareholder complaints will pass like a summer shower.

If you're dissatisfied with this result, we need to work even harder. Collective shareholdings count. I ask you to spread the word of your unhappiness by joining our group at:

Thanks again for your support to help make this a better company for its customers, employees, and shareholders.

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Carl Icahn boosts Motorola stake in 2Q

Billionaire investor Carl Icahn raised his stake in Motorola Inc. during the second quarter to 55.3 million shares, from 9.4 million shares in the previous quarter, according to a regulatory filing Tuesday with the Securities and Exchange Commission.

For the quarter ended June 30, Icahn Management LP reported owning a 2.4 percent stake in the Schaumburg, Ill.-based company.

Here's the full story.

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Tuesday, August 14, 2007

NY Times: Measuring Shareholder Anger at Yahoo

From the Bits section of the NY Times:

August 13, 2007, 6:33 pm

By Miguel Helft

Tags: , ,

The recent history of Yahoo’s troubles is well-known: the company lost the search race to Google; it missed out on key trends — social networking, for instance — and potential acquisitions — Facebook, most notably; its performance disappointed; some shareholders grew restless and focused their anger on a board that gave former CEO Terry Semel one of the richest pay packages in Corporate America.

But what percentage of shareholders were restless? Now we know. Yahoo, in its latest quarterly report, shows that the protest was concentrated on three directors–Arthur Kern, Roy Bostock and Ron Burkle–who served on the company’s compensation committee, in accordance with the recommendation of three Wall Street advisory firms. Of the 1.125 billion shares outstanding, 35 percent voted against, the reelection of Mr. Burkle, 35 percent against Mr. Kern, and 34 percent against Mr. Bostock.

Until now, all we knew was that nearly a third of votes were withheld against one or more directors.

Interestingly, the filing also shows that between 6 percent and 8 percent of shareholders voted against the reelection of Yahoo’s other directors as well, including chairman Terry Semel, who left the CEO post shortly after the mid-June shareholder meeting, and his replacement, co-founder Jerry Yang.

Eric Jackson, a shareholder activist who ran a campaign against Yahoo’s board, analyzes the vote, and compares it with a year earlier, when support for the board was virtually unanimous. Mr. Jackson concludes that “further changes at the board-level should be followed through on by Yahoo!’s new team to respond to the voices of discontent from the shareholders.”

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Monday, August 13, 2007

BusinessWeek: Facebook's New Wrinkles

The 35-and-older crowd is discovering its potential as a business tool

Maybe you've gotten one of them in your e-mail in-box lately: an invitation to be a "friend" on the social networking Web site Facebook. And you've wondered: Why would I want to join a bunch of partying college kids? That was what Bill Swartz, a 51-year-old executive recruiter in Phoenix, thought until a few weeks ago, when he dived into Facebook after reading a newspaper column about it. To his surprise, he loves it--especially the updates his contacts post regularly about their everyday activities, even things as mundane as where they're vacationing or what they ate for lunch. For Swartz, that's insight into the personalities of potential clients and headhunting prospects. "My business is personality-matching," he says. "This can really help me find just the right people."

Facebook has a lot of newbies these days, many of whom are in fact oldies. The number of unique Facebook visitors 35 and older more than doubled in June from a year ago, to 11.5 million, according to market researcher comScore Media Metrix. (Anyone going to the site counts as a visitor. But to have a page or have friends, you need to join.) Most newcomers aren't yet doing much real business there, preferring more buttoned-down sites like LinkedIn or e-mail for maintaining professional contacts. But they're intrigued enough with the communications potential of Facebook that they now make up 41% of the site's visitors. That's a boost for privately held Facebook, whose widely presumed multibillion-dollar valuation is based on the potential appeal to advertisers seeking big new audiences online.

As they join Facebook, older users are tiptoeing into a new social landscape. Among the tough questions: How much personal information should I reveal? What does it mean to be a "friend," and how many can I have before I'm overwhelmed with requests and information? And not least, what's a "poke"? (Just what it sounds like: a vaguely suggestive signal that someone wants your attention.) "The lines between what's business and what's personal have blurred," says Facebook co-founder and CEO Mark Zuckerberg, 23.

Nonetheless, the new demographic presages a sea change in social networking. Even if younger people don't feel the need to distinguish between personal and professional contacts, anyone over about 30 usually does. Facebook allows people some control over what information they reveal to whom, but it's likely Facebook's new demographic will demand even more ways to differentiate between various levels of "friends." (Level one: ex-dorm buddies, girlfriends. Level two: sales contacts, fantasy-league teammates. Level three: anyone who signs off on your performance review.)

This influx doesn't thrill all the 20-something pioneers, who are starting to feel inhibited by the older folks looking over their shoulders. Some anti-elder groups have emerged on Facebook, many clearly humorous but others with names such as "I hate old people" and "Kill the elderly." Regardless, "old people" are piling in and weaving Facebook into lives already glutted with information and relationships. "I don't want to be left out," says Bernard H. Tenenbaum, 51-year-old managing partner of investment firm China Cat Capital.

They're also finding real utility. They can build social capital with little effort just by noticing that a contact has posted an update about her birthday today and wishing her well. Eric Jackson, CEO of management consultant Jackson Leadership Systems Inc. in Naples, Fla., who's leading shareholder campaigns to shift strategies at Yahoo! Inc. (YHOO )and Motorola Inc. (MOT ), says he used Facebook to reach some Yahoo employees he couldn't otherwise find.

Some of those older people, it must be said, are rather less social than they appear. Carl Kasell, the 73-year-old National Public Radio newscaster and judge on the NPR quiz show Wait Wait... Don't Tell Me, has "friended" dozens of people. Or so it seemed. It turns out the show's 23-year-old director, Melody Joy Kramer, actually runs his Facebook page. "Carl only looks at it every Thursday," she says. "He doesn't really use a computer." Fortunately for Facebook, Kasell seems the exception.

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Dick Notebaert is officially available

Although he has publicly denied any comment on the matter, it will be interesting to see whether this news augurs changes at the senior ranks of Motorola in the days ahead.
His pre-Qwest bio illustrates his many Chicago ties:
Mr. Notebaert began his career in 1969 at Wisconsin Bell, where he held a number of positions in operations and marketing before moving to Ameritech Communications in 1983 as vice president of marketing and operations. He became president of Ameritech Mobile Communications in 1986, president of Indiana Bell in 1989, and president of Ameritech Services in 1992.

In 1993 he became president and chief operating officer of Ameritech Corporation and in January 1994 was elected president and chief executive officer. He was elected to the position of Chairman and Chief Executive Officer on April 20, 1994.
Mr. Notebaert received a bachelor of arts degree in 1969 and a master's degree in business administration in 1983, both from the University of Wisconsin. He received the 1999
Distinguished Alumni Award from the University of Wisconsin-Milwaukee. He has received the following honorary degrees: doctor of business management from Indiana Wesleyan University, doctor of science and technology from the University of Indianapolis; and doctor of science from Ripon College. He is a member of the board of directors of Sears, Roebuck & Co., Aon Corporation, Cardinal Health, Inc. and Tellabs Inc. He is a trustee of the University of Notre Dame and the Chicago Symphony Orchestra. He is also a member of the University of Illinois President's Advisory Council, a member of the Chicago Metropolis 2020 Executive Council and a member of the Brookfield Zoo Board of Advisors. Mr. Notebaert is currently a member of The Business Council, the Civic Committee of The Commercial Club of Chicago, The Economic Club of Chicago and The Executives' Club of Chicago.
Mr. Notebaert and his wife, Peggy, have two adult children and are Chicago residents.

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Friday, August 10, 2007

SJ Mercury News: Yahoo's Decker's stock buy seen as sign of confidence in firm

Here's some welcome news to Yahoo! shareholders. Let's hope other Yahoo! execs and directors follow her lead. Good move, Sue.

By Ari Levy
Bloomberg News
Article Launched: 08/10/2007 01:37:07 AM PDT

Yahoo President Susan Decker boosted her stake in the Internet company by 12 percent, a sign she may be optimistic about growth prospects.

Decker, 44, purchased 47,000 Yahoo shares for $1.1 million last week, according to a filing Thursday with the U.S. Securities and Exchange Commission. That brings her ownership to about 425,000 shares, or $10.1 million, based on Bloomberg data.

Sunnyvale-based Yahoo named Decker president June 18 in a management shake-up that brought in co-founder Jerry Yang as chief executive to replace Terry Semel. The company, which has lost market share in Internet search to Mountain View-based Google, is investing in new advertising software and upgrading its mobile-phone and video services.

"Usually, the buying and selling of stock by management is part of the normal landscape of business," New York-based JPMorgan Chase analyst Imran Khan, who rates the shares "overweight," said in a report Thursday. "However, we believe that this isolated incidence is evidence of increasing management confidence in company performance."

Yahoo spokeswoman Joanna Stevens declined to comment.

The company reported last month that second-quarter profit fell 2.3 percent as Google extended its lead in Internet search and new rivals took market share in online advertising. Yang said in a conference call after the July 17 report that he would spend the next 100 days developing a long-term strategy.

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Thursday, August 09, 2007

Yahoo!'s Annual Meeting Against Vote

Last evening, Yahoo! released its 10Q. In it, they disclosed the final shareholder "against" votes from the June 12th Meeting.

Here are the numbers (not including abstentions) from this year's vote and how that compares to last year's vote:

  • Arthur Kern - 33% Against Vote (up 33x from 1.0% last year)
  • Ron Burkle - 33% Against Vote (up 33x from 1.0% last year)
  • Roy Bostock - 31% Against Vote (up 26x from 1.2% last year)
  • Robert Kotick - 8% Against Vote (up 4.2x from 1.9% last year)
  • Gary Wilson - 7% Against Vote (up 5.4x from 1.3% last year)
  • Vyomesh Joshi - 7% Against Vote (up 7.8x from 0.9% last year)
  • Eric Hippeau - 6% Against Vote (up 2x from 3.0% last year)
  • Ed Kozel - 6% Against Vote (up 6.7x from 0.9% last year)
  • Jerry Yang - 6% Against Vote (up 7.5x from 0.8% last year)
  • Terry Semel - 6% Against Vote (up 4.3x from 1.4% last year - although 2 million more votes were marked "abstain" for him compared to the other directors)

Finally, 34% voted "for" the pay-for-performance stockholder proposal.

All in all, it was a much more sizable "against" vote -- and one that hit all directors, not just a few -- compared to a year ago when only 1 to 2% (which is the norm for most votes) of the votes cast were against various directors. These are historically very significant year-over-year changes for a shareholder vote.

It suggests that further changes at the board-level should be followed through on by Yahoo!'s new team to respond to the voices of discontent from the shareholders.

Here's a recap of the "Plan B" campaign ads leading up to the Annual Meeting:

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Wednesday, August 08, 2007

What Would Bob Galvin Say About Today's Motorola?

Over the last 4 weeks, since I've launched the Motorola "Plan B" Campaign for a stronger company and better returns for shareholders, many Motorolans have reached out to me by commenting on this blog, sending me emails, or - in some cases - calling me up directly.

Each opportunity I have to interact with them allows me - as a shareholder - to hear about how my investment is functioning from the inside. The view I've received from many different sources is not a particularly encouraging one. Disappointment, cynicism, and fear are rampant.

Whenever I talk to employees - and I did the same during the Yahoo! campaign - I always ask them who on the current management team they like (as opposed to only focusing on the aspects of the company they dislike). None of the current members of the Motorola Senior Leadership Team has ever been named for me. The best I've heard back is that people respect the finance and legal groups (as a whole).

However, I would say 1 out of every 2 Motorolans I speak to mentions the name Bob Galvin. Bob is, of course, the son of Motorola's founder Paul Galvin. He was CEO from 1956 to the early 90s. Until a few years ago, he was also on the Motorola board. Today, he's 85 -- and as sharp as ever, from what I hear. Along with his son, Chris, he is officially outside Motorola.

I don't know Bob Galvin. I've never met him. But, I was struck at how his name kept coming up in my conversations. And it wasn't only from the 30 year vets. One employee, who hasn't yet celebrated his 2nd anniversary with the company, talked about how his legacy still casts a long shadow through the halls and the offices of the company and how his name was mentioned often during these difficult days the company is now facing.

Why? What is Bob Galvin's legacy?

I found some interesting info about him on his American National Business Hall of Fame entry.

  1. Bob learned the business from the ground-up and from mentors -- not by doing stints at McKinsey, BCG, and Bain. In addition to formal management training Bob Galvin learned the business by working in lower level jobs and by receiving mentoring from older employees. Among his most important mentors was Paul Galvin.
  2. Paul Galvin passed on 2 keys to building a successful entrepreneurial culture within Motorola. (1) Do not fear failure! In other words, entrepreneurs take risks and risk takers will inevitably experience some failures. Fear of failure can prevent a potential entrepreneur from taking risks. (2) Recognize the signs! In other words, recognize the possibility of failure and move quickly to cut losses once it is clear that a new project will not become profitable.
  3. He was not a one-man show. Instead, Bob Galvin maintained an egalitarian culture in which managers at all levels were encouraged to develop a sense of proprietorship and a willingness to engage in open discussion.
  4. Bob Galvin felt that the key to Motorola's long-term prosperity was effectively serving its customers, employees, shareholders, and community. (FOR) CUSTOMERS, (our objectives are) to serve every customer better than our competitors with products and services of excellent value and quality , and thereby earn continued enthusiastic trust and support. (FOR) PEOPLE (our objectives are) to treat each employee with dignity, as an individual; to maintain an open atmosphere where direct communication with employees affords the opportunity to contribute to the maximum of their potential and fosters unity of purpose with Motorola; to provide personal opportunities for training and development to ensure the most capable and effective work force; to respect senior service; to compensate fairly by salary and benefits and, where possible, incentives; and to practice the commonly accepted policies of equal opportunity and affirmative action. (FOR) SHAREHOLDERS, (our objective is) to have our shareholders prosper and, therefore, make our equity securities an attractive investment. (FOR OUR) COMMUNITY, (our objective is) to be a good corporate citizen by contributing to the economic and social well-being of every community and country in which we operate. The corporation will encourage its employees to actively participate in community affairs.
  5. Bob Galvin's Motorola's culture was based on participation, proactive empowerment, and personal accountability. He called everyone by their first name, wore shirt sleeves, and encouraged open discussion. While disagreement was considered a healthy sign at Motorola, Bob Galvin insisted on constant respect for people and uncompromising integrity. The hoped for result was the kind of trust that leads to creativity and hence long run survival.

All good solid principles to run a successful company by. It makes you wonder what Bob Galvin would say about today's Motorola from his vantage point.

It also makes you wonder how many times Ed Zander has sought him out to discuss the issues facing the company. Of course, every CEO must run an organization in the manner they see fit. But there is no shame in privately seeking out a past employee or leader -- especially the Founder's successful and respected son -- to seek counsel.

Alas, I would guess that's not happened here.

Here I must confess a personal bias: I have infinitely more respect for a founder (or a son of a founder) than a "professional manager." There are some excellent and very successful professional managers in the world, but a founder is a special person. To start with nothing and create a multi-billion dollar industry titan is a stunning accomplishment.

Carly Fiorna would have done well to seek out and win over HP's founders, rather than proudly seek to do things her way.

Ed Zander would have done well -- especially coming in from the outside to the communications industry -- to emulate the principles that made Motorola so successful under Bob Galvin.

Sometimes, change is good and appropriate (such as now, which is why we launched "Plan B" for Motorola). Sometimes, successful priniciples are timeless. God, grant us the wisdom to know the difference.

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Tuesday, August 07, 2007

No Response from Motorola's Board to "Plan B" for Les Miserables Shareholders

It's been slightly over a week, since I forwarded the finalized copy of our investor group's "Plan B" for Motorola to the Non-Executive Members of Motorola's Board.

A month ago, when I sent the initial draft copy of the plan to the company before releasing it publicly, I received an email back from Dean Lindroth 3.5 days later. Mr. Lindroth is the new head of Motorola Investor Relations. At the time, he thanked our group for our input.

He said:

"We value inputs from all of our shareholders and appreciate your feedback. I will share your input with the Board Secretary and the management team."

This time, no response.

Late Friday, I called Mr. Lindroth. Although I didn't reach him directly, I left a voice mail for him. I told him that our group consisted of 126 members, owning about 600,000 Motorola shares - including many current Motorola employees. I conveyed that we wished to meet face-to-face or by phone with the Non-Executive Members of the Board at their earliest convenience to discuss the contents of the proposed plan and possible next steps. I suggested that I thought we could find a positive solution for the company, its employees, and its shareholders through such constructive dialogue.

Instead, we've had no dialogue.

Since we've launched our "Plan B" campaign for Motorola, the company has only implemented one of our previously suggested actions: hiring a new head for the Mobile Devices Business (someone who we were not satisfied with).

What are the consequences of this board and corporate inaction to shareholder concerns?

From July 9th through today, Motorola's stock price has dropped 8.13%. Think it's a general market swoon? Think again. The S&P has dropped by 4.5%. And Nokia? Well, they had a blowout quarter, taking advantage of Motorola's weakness globally. Nokia's stock is up over 3% since July 9th.

Since the May Stockholder's Meeting, the attitude from the Board and Senior Leadership Team towards shareholders' legitimate questions has suggested: "The status quo is fine. We're figuring things out. Let them eat cake."

We're here to say that the status quo is not acceptable. We're not willing to sit back and watch this company underperform the market for another month. Enough is enough. It's time to storm the Bastille of Schaumburg.

I've spoken with a large majority of Motorola's top ten institutional holders since we went public with our campaign. Most are sympathetic to our calls for change. Whether they formally join up with us or not, no Motorola shareholder can be happy with the current state of this great American institution.

One representative from a very large holder of Motorola's stock told me:

"It will be very interesting to see how they respond to the points of your plan. They're obviously well thought-out and seem to make sense. If they just meet with you to be able to say they met with you, that will say something. In these situations, it's not just what the Board and Company say to a critic, it's how they respond. That will be very telling."

Indeed. To this point, we haven't even received the courtesy of a going-through-the-motions meeting so that they can say they've met with us and heard our points (and respectfully disagree).

I'm not happy with this non-response - and no other Motorola shareholder should be. If a shareholder cannot raise serious and credible concerns about the way a company is being run after a lengthy and painful downturn, when is the right time? Are we only supposed to speak up at the Annual Meeting and then bite our tongues for 12 months? Are we supposed to be patient and trust in the Board and Management with blind faith?

I love this company - and I know most of our supporters do too. One Motorola employee supporting our group said it best a few weeks ago in a comment on the draft plan:

"Dissent is the highest form of patriotism."

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Naples News: Naples activist: Calling all Motorola investors, directors

From today's Naples News:

By Laura Layden

Originally published — 11:11 p.m., August 6, 2007
Updated — 5:51 a.m., August 7, 2007

Eric Jackson has put out his final call to Motorola.

He has finalized what he calls “Plan B” for the company.

The Naples activist investor sent the plan to the cell phone maker and its independent directors a week ago.

With more than 120 investors rallied behind him, he hopes to “return the company to its rightful leadership position in the communications industry.”

Using only the Internet, Jackson has drummed up support for his plan. Using his blog and YouTube, he ran a similar campaign against Yahoo! that observers say helped oust Terry Semel as chief executive officer a few months ago.

Jackson hasn’t heard back from Motorola yet. A Motorola spokesman couldn’t immediately be reached for comment.

The investors behind Jackson’s plan own 600,000 shares. He owns 180 shares.

“The response has been very positive. I think people are disappointed in the recent performance of Motorola,” said Jackson, 35, a business and management consultant and president and CEO of Jackson Leadership Systems Inc. in Naples.

Most supporters are small investors. Among them is 17-year-old Jordan Wells, who owns five shares of Motorola stock.

“We’ve already seen blogs and grassroots technology shake up the political world. It’s great to see them shaking up the financial world,” Wells wrote in an e-mail to Jackson.

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.

Jackson first developed a draft plan, which he sent to the company in early July. During the past few weeks, he has refined the plan based on suggestions he received from supporters by phone and through his wiki Web page and e-mail.

Here are the demands in the final plan:

ΠEd Zander must immediately leave as chairman and CEO.

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

Œ Appoint Edward Lampert to Motorola’s board and others with deep communications experience.

ΠReduce the size of, and insiders on, the board.

Œ Outline Motorola’s strategy and how it will add exciting new products.

Œ Give Motorola’s culture an inspirational transfusion.

The plan criticizes Zander for not having a clear vision for the company. It asks directors to answer these questions: What has been Ed Zander’s mark on Motorola? He came with a Silicon Valley background, but how has that experience or those past ties translated into tangible results for the company? What has he brought to Motorola in the last 3 1/2 years?

“The fact that there are no obvious answers to these questions screams why a change is needed now,” the plan says.

The plan demands that the board immediately renegotiate Zander’s severance package to ensure that he doesn’t receive $30 million simply for leaving the company.

The plan questions the independence of board directors Lewent, Negroponte, Scott and White because they’ve been on the board so long. It suggests adding Lampert of ESL Investments Inc. to the board because of his strong track record of business experience. He recently purchased stock in the company.

The Motorola board now has three insiders on it: Ed Zander, Greg Brown and Tom Meredith.
At a time when the company has underperformed, the plan suggests that only the CEO serve on the board and criticizes the board for being too large with 13 members.

There seems to be no clear strategy for Motorola, the plan says, and the 18 new models that have reached the market this year have had only lukewarm response.

“In our opinion, none of the models is a game-changing device that will sweep up the consumer or business space,” Jackson says in the plan. “They are incrementalist improvements on past styles. Recent excitement over competitors’ new product launches makes the differences all the more stark.”

Nokia recently announced an “amazing quarter” and its market share is about 38 percent, Jackson said. Motorola has 13 percent of the market, and has slipped to No. 3, behind Nokia and Samsung, he said.

The plan points to “a significant cultural problem.”

“The biggest barrier Motorola faces to righting the ship is not moving some numbers around on the corporate balance sheet; it’s winning back the hearts and minds of its own people,” Jackson said, addressing the board in the plan.

He said “confusion, cynicism and fear appear to have taken root following the recent rounds of layoffs.”

Many supporters of Jackson’s plan are Motorola employees. The support came more quickly this time after his success with Plan B for Internet search giant Yahoo!

Jackson has asked to meet with the Motorola board as soon as possible to discuss the plan.
In the plan, he makes it clear that the investor group doesn’t believe there is a quick fix for Motorola.

“Replacing Ed Zander alone is not the solution; it will require a multipronged effort,” the plan concludes.

If there is enough support from investors, Jackson said he may push Motorola to hold a special meeting to allow shareholders to vote on the plan.

“I would definitely like to meet with the board members and present our views face to face,” he said.

“I think they would be doing their shareholders a service to show they are open to listening to new ideas and open to constructive dialog,” he said.

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Monday, August 06, 2007

IR Magazine: Activists with Attitude

From IR Magazine:

Aug, 2007

By Clare Harrison in London and Anna Snider in New York

Takeover battles have long been the classic way to challenge corporations, but they cost millions and can get messy. Minor stakeholders making behind-the-scenes approaches to management often can’t get a meeting. Now some rogue investors are refusing to be marginalized, finding opportunities to stir up trouble by launching hard-hitting, election-style campaigns backed up with a generous helping of publicity.

It’s not hard to do in the internet age. Since April, small shareholders in Vodafone, Yahoo, Aquila, Friendly’s Ice Cream and AIM-listed Torex have been using websites, blogs, bulletin boards and even YouTube to organize broader investor rebellions. While it is unclear precisely how much effect they’ve had, they are getting attention. Proxy advisers say this type of activist attack may become commonplace, particularly as companies and shareholders begin choosing to communicate by e-proxy.

In April Connecticut-based hedge fund Pirate Capital put up a website,, dedicated to generating opposition to the sale of utility Aquila to Great Plains Energy. The Texas-based Lion Fund also began publicizing its interest in two board seats at Friendly’s on In the UK, Efficient Capital Structures (ECS) followed suit with, which lays out ECS’ radical plans for Vodafone.

New-age techniques

The sites drew their share of commentary in the financial press, in part because of their novelty. But they also gained notice because their slogans and posturing were more reminiscent of political campaigning than anything seen before in financial markets.

‘The logistics of communicating with shareholders is difficult so we are using modern techniques like websites and email to reach them,’ notes Glenn Cooper, chairman of ECS. ‘My background is in corporate finance and these days we are regularly using websites and chat rooms to monitor investor sentiment.’

Eric Jackson, who led the assault on troubled Yahoo, said he consciously studied grassroots political campaigns before selfbroadcasting irreverent spots explaining his ‘Plan B’ on YouTube.

‘I was surprised these techniques hadn’t really been used in the shareholder realm,’ he says. The UK Shareholders Association (UKSA), which represents private investors, also made full use of online media during its battle with Torex. ‘You can get a lot of publicity quickly by using bulle-tin boards and the internet in general, and setting up your own website helps enormously,’ remarks Roger Lawson of UKSA.

Retail investors seem to be benefiting from the support of their larger institutional peers, too. ‘I think institutions are becoming more amenable to working with private investors,’ Lawson adds. ‘If you take the case of ABN Amro, it was the VEB, the Dutch private investors’ association, that attacked the firm initially, but it was greatly helped by the support of a larger resource-rich institution.’

Jackson defends small shareholders like himself against accusations they are part of a lunatic fringe. He says he and his fellow activists are just asking questions on behalf of those who have opinions but lack the political will to act on them. Indeed, there were many current and former Yahoo employees who sent him private messages of support and share pledges, he maintains.

Global activity

The good news for activists lacking in financial clout is that this trend is not confined to Europe and the US. In Japan investors scored a first in Japanese proxy history when they reversed a merger agreed upon by the management teams at Tokyo Kohtetsu and Osaka Steel. The battle saw the recently launched Ichigo Asset Management become the reluctant star of one of this season’s most watched proxy fights. ‘We met with management to try to avoid a proxy fight but, unfortunately, we failed,’ remarks Scott Callon, founder of Ichigo. ‘Although we led the campaign, it was the individual retail shareholders of Tokyo Kohtetsu who stood up to be counted as their votes were worth twice ours.’

Small activists may not always be able to replicate the situation with Kohtetsu and force a company to change direction. But they are succeeding in shaping strategy by making a democratic process out of company decisions that traditionally have not been up for debate.
Patrick McGurn, senior vice president and special counsel for Institutional Shareholder Services, says the internet is giving the activists leverage. ‘In light of e-proxies, this type of activity is going to grow exponentially,’ he predicts.

Jackson says his ability to amplify his small stake shows that tiny shareholders can secure more status. ‘Before, the conventional wisdom was you had to have 2 percent to 10 percent in a large company or you wouldn’t be listened to,’ he says. ‘Now what seems more important is the quality of the argument.’ Cooper agrees. ‘We’re not like some hedge funds that say they’re really important because they own 5 percent,’ he says. ‘We’re saying these are really important issues on which shareholders should have a vote.’

Cooper and his colleagues used section 376 of the UK Companies Act to allow them to put resolutions to Vodafone’s AGM. ‘Under that article, 100 shareholders holding a minimum capital of approximately £350,000 ($711,526) between them may put resolutions to the general meeting,’ he explains.

The 210,000 shares ECS bought initially constituted what Cooper calls a ‘minuscule’ stake in Vodafone – which has a market cap of nearly £90 bn – but in the game of proxy battles, size isn’t everything. ‘Our whole company is less than a fifth the size of Vodafone’s PR department,’ Cooper adds.

Garnering support prior to going public with a resolution is difficult for any activist investor. To get around this problem, ECS commissioned a third party to gauge investor sentiment toward its proposals in advance. The researchers asked investors how they felt about issues relating to the capital structure at Vodafone. ‘We took comfort from the poll results that showed shareholders felt passive stakes should be spun out to shareholders, which is what we were suggesting,’ remarks Cooper.

Technological advantage

Back in the US, with developments coming out his way at Yahoo, Jackson says he now has a few mid-cap companies on his radar. He acknowledges that his fifth YouTube campaign might not attract the same attention as his first. ‘There are going to be diminishing returns,’ he concedes. ‘For whatever reason, people like to write and read about Yahoo.’

McGurn agrees. ‘Yahoo also has a very techno-savvy shareholder base,’ he adds. ‘YouTube may not be as effective in other situations.’ But Jackson sees continuing media interest: ‘You may see campaigns by larger shareholders over the internet. The attention they get may be driven by who the shareholders are.’

In any case, the infrastructure for dissident campaigns is only improving. Mike Dever, co-founder of, says he wants the Yahoo effort to be the first of many. ‘We’re going to make shareholder activism a stand-alone category of campaign starting in August,’ he says.

Electronic distribution of the proxy statement, which will be a mandatory offering to most US shareholders next year, could play a huge role here as well. The advent of e-proxies brings the dissident campaign down ‘to zero cost,’ at least when targeting shareholders who don’t ask for paper proxies, McGurn says. That’s a big shift: at a recent SEC roundtable, activist investor Stanley Gold of Shamrock Holdings said his 2004 campaign to get Michael Eisner off the Disney board cost $2 mn in US postal fees alone.

Swingvote, a shareholder communications firm, even has a new technology to reach out confidentially to street-name shareholders typically walled off from direct solicitation by their brokerage firms. Swingvote’s senior vice president of business development, Carolina Menezes, says she expects dissidents to use this solution plus additional Swingvote technology to embed video, audio or plain text outlining their views directly in online ballots.

McGurn will be there to take note. ‘We like to bring dissident campaigns to the attention of our clients,’ he says. ‘We’ll make an effort to do that in the future as more investors avail themselves of internet outlets.’

So be warned: it may well be worth arranging a meeting with your small shareholders before they go public with a YouTube campaign that captures the imagination of thousands of investors. Fail to do so and you could have a mutiny on your hands.

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Thursday, August 02, 2007

Yahoo! hires the Engineers that Motorola laid off in Champaign

How is this for synergy? Yahoo! has decided to open a 100 person engineering center in Champaign. Long know for its ability to produce top-flight engineers, and Silicon Valley heroes like Andreesen, Levchin, Hurley, and Chen, Yahoo! has decided to put down stakes in the area.

As a Yahoo! shareholder, I'm delighted. I hope this is a sign that David Filo (and perhaps Jerry Yang too) is putting his mark on the company in a very positive way.

As a Motorola shareholder, I'm disappointed. As the story notes below, Yahoo! is basically hiring the staff that Motorola recently laid off. From what I was told, many in Champaign were working on the long-promised Linux/Java (or "LJ" as MOT insiders refer to it) platform (translation: richer, faster, better) for the phones. I understand this work for Motorola is now being done in Beijing. We'll have to watch and see how that goes.

Motorola's loss is Yahoo!'s gain. They obviously thought these folks were talented. Good luck to them and Yahoo!

Here's the story.

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WSJ: Nokia's Net More than Doubles On Strong Sales, Bigger Market Share

Motorola's losses are Nokia's gains.... From this morning's WSJ:

By DANIEL THOMASAugust 2, 2007 7:43 a.m.

LONDON -- Nokia Corp. Thursday said second-quarter net income more than doubled, surprising investors, as the world's largest mobile-phone maker took a 38% share of the global phone market.

The Finland-based telecommunications equipment saw mobile-phone shipments jump 29% to 100.8 million, resulting from a push into high-volume markets, such as India and China. Rival Motorola Inc.'s recent woes are also believed to have helped Nokia gain market share. Earlier this month, Motorola posted a second-quarter net loss and a huge slide in sales.

Nokia lifted the average selling price of its devices sequentially to €90 from €89, as it introduced a number of high-end phones, including the Nokia N95 multimedia device. Average selling prices fell 11% from €102.

The mobile-phone maker said net profit for the three months ended June 30 increased to €2.83 billion, or 72 European cents a share, from €1.14 billion, 28 cents a share, a year earlier.
Excluding special items earnings per share came in at €0.32, still ahead of analyst expectations. The quarter included a €1.88 billion nontaxable gain from the creation of its joint-venture with Siemens AG.

Revenue increased 28.3% to €12.59 billion from €9.81 billion. Analysts, who predicted that Nokia would report lower profits as a result of its push into lower-priced emerging markets and costs related to the setting up of its Nokia Siemens Networks joint-venture, had expected net profit of €1.06 billion, or 28 cents a share, on revenue of about €12.91 billion.

"Nokia continued to grow in the second quarter thanks to an excellent performance from our device businesses. Nokia's share of the global device market improved to an estimated 38%, while operating margins in our device businesses were at their highest level in three years," Chief Executive Olli-Pekka Kallasvuo said, adding that he expects the mobile device market to grow by 10% or more in 2007 to around 1.075 billion.

But Mr. Kallasvuo said its Nokia Siemens Networks joint venture had faced a challenging quarter, with net sales and margins both weak. The company said it would be "accelerating and increasing" the company's cost-savings targets as a result. Nokia Siemens Networks now plans to target annual cost savings of €1.5 billion by the end of 2008, rather than 2010.

Shares of Nokia were 7% higher in European trading at €22.08.

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