Friday, November 30, 2007

Chicago Daily Herald: Motorola's Zander says it's time to resign

From the Nov. 30/07 Daily Herald:

Says transition was in the works for a while

By Anna Marie Kukec Daily Herald Staff

Ed Zander's resignation today as chief executive of beleaguered Motorola Inc. didn't surprise Wall Street. Indeed, he said he has been planning this transition for the last two years by grooming his successor, Chief Operating Officer Greg Brown.

"It's time," said Zander, during an interview. "When I got here, it was a big move for me coming from the West Coast more than four years ago. My wife and I did a lot of soul searching and I was in a place in my career that I wanted to just take a chance here in Chicago."

Zander, 60, said he started talking with the board two years ago about putting a succession plan into place. That was when Motorola's share price was in the $20 range, the highest he would see during his tenure. Zander then put Brown, now 47, on the fast track by promoting him to different leadership positions.

"We kept giving Greg every conceivable job that we could throw at him and asked him to help build up this enterprise," Zander said. "And he's done a great job."

Brown will replace Zander by Jan. 1 while Zander will continue as chairman of the board. Zander doesn't receive any severance package because he resigned. But he still is eligible for all stock options and restricted stocks that vest Jan. 5, 2009, which would have been his retirement date.
In addition, Zander will be an adviser to Brown until Jan. 5, 2009, and so will be paid his regular salary and benefits until then, Motorola spokesman Chuck Kaiser said.

Zander's total compensation package earlier this year was estimated around $13 million.
Despite the take-home pay, it's been a long haul for the West Coast tech veteran of 40 years, whose career includes stints as managing director of private equity fund Silver Lake Partners and president and chief operating officer of Sun Microsystems.

By February 2004, Zander shivered through his first winter in Chicago and skied in with Wall Street accolades on the coat-tails of the then new Razr phone. That world-changing handset was under production by former Motorola CEO and grandson of a co-founder Christopher Galvin, who retired under pressure.

Coincidentally, Motorola's share price when Zander took over was $18.45 with an adjusted close of $15.95 in February 2004. The price peaked in the $20-range from mid-2005 through late 2006. The stock closed up 32 cents to $15.97 today.

"Ed Zander's big mistake was thinking that the single success of the Razr phone was enough. It was not," said independent telecom analyst Jeff Kagan of Atlanta, Ga. "The Razr may have been hot, but Motorola needed to replace it with another hot phone. Instead they rode it up and rode it back down again."

During his tenure, Zander faced much of what Galvin faced: the No. 2-rated mobile phone maker began a downward spiral in global market share against stiff competition, profits dwindled, layoffs and closed plants continued.

This year, especially, was hard on Zander and the company when billionaire activist Carl Icahn sought in vain to win a seat on the board.

"I like Ed Zander personally; I never thought that he was the right man for the job at Motorola," Icahn said in a statement today. "Further, I believe that the steps announced today do not even begin to address the major problems at Motorola. In my opinion, Motorola should be split into separate companies: a mobile devices company; an enterprise mobility company; a connected home company; and a company focused on mobile networks infrastructure."

A Florida-based consultant began a campaign to unseat Zander just as he did to Yahoo's CEO Terry Semel.

"I'm ecstatic. It's a step in the right direction, but it's not the entire solution," said Eric Jackson, president of Jackson Leadership Systems Inc., a governance consulting firm in Naples, Fla. He offered the Motorola board a reorganization plan that called for Zander to leave.

"This was needed," Jackson said. "You can't change much without starting with the top.

While Zander is removing himself from day-to-day operations, he will continue to be active on the board.

"That's a way of saving face," Jackson said. "It's more of a symbolic role. Eighteen months from now, he may not be chairman anymore."

Zander said in the last six months or so, he was working more closely with Brown to make the transition. In July, Brown and Chief Financial Officer Thomas Meredith insisted during an interview with the Daily Herald that Zander would remain at the helm despite Wall Street rumors a successor was being sought.

"Ed and I have been working very closely, especially these last few months," Brown said during an interview today. "We have been focusing on reconfiguring this company and integrating a lot of talent. This is a special company and it still has great potential."

Brown said together they've changed about 50 percent of the leaders in the mobile devices business.

Said Jane Zweig, a wireless devices analyst with The Shosteck Group in Columbia, Md.: "Brown is an organization guy, a networks guy, but he's not a consumer electronics guy."

"You still need someone in there with a good strong background in devices. Stu Reed, who heads up the supply chair, would be possible," Zweig said. "But this still raises the question of what Motorola has coming down the pipeline. Will it turn people's heads like the Razr once did?"

There is no magic turn-around key for Motorola, so Brown has his work cut out for him, said Mark McKechnie, an analyst with American Technology Research.

"The good news is, Motorola is promoting from within again, which can provide some consistency," McKechnie said. "It's better than when they brought in Zander from the outside, which didn't work."

Despite the detractors, Zander has many friends in the industry, including Stephen Luczo, who knew Zander when he was at Seagate Technology in Scotts Valley, Calif., where Zander had served on the board.

"We're happy that Ed's coming home," said Luczo. "He's done a good job at Motorola and Brown is also an outstanding guy. It's a testament to Zander to be able to do such a smooth transition."

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adam hartung said...

Ed Zander inherited a very troubled Motorola, and lest us forget he reinvigorated communications and opened doors for innovation. Several new products were introduced in all Motorola businesses, and the company remains at the forefront of 2-way radios in almost all markets as well as DVRs. The company beat Apple to market with the ROKR and several other products. Unfortunately, not enough emphasis was placed on growing revenues from these innovations, and discussion devolved to talking about cell phone market share - a not-too-interesting topic. Read more at