Icahn Presses His Case
To Join Motorola Board
Investor Eases Demand for Big Stock Buyback,
Says Firm Must First Fix 'Operational Problems'
By LI YUAN and ROGER CHENG
April 13, 2007 6:07 p.m.
Activist investor Carl Icahn intensified his battle to get a seat on Motorola Inc.'s board Friday, telling shareholders that he was willing to spend "the time, effort, money necessary" to seek the election.
Mr. Icahn, who through his affiliates holds a 2.9% beneficial stake in Motorola, said in a letter addressed to shareholders that he didn't understand that why Motorola's board doesn't support his bid for a board seat despite his large stake in the company and his business experience.
ICAHN TURNS UP PRESSURE
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Read Carl Icahn's letter2 to Motorola shareholders, saying operating improvements must come before any large stock repurchases. Read company's comments3 to holders, provided by 10-K Wizard (www.10kwizard.com4).The letter comes as Motorola is struggling to deal with falling profits and a share price that has declined by one-third since October. The Schaumburg, Ill., telecom equipment maker posted a one-third profit drop in the last quarter of 2006 and forecast a profit loss in the first quarter of this year, amid a collapse of profit margins for its popular RAZR cellphones. Motorola has also said that the second quarter will be "difficult."
"My experience tells me that Motorola's problems reflect not only operational failures, but also symptoms of a passive and reactive Board," Mr. Icahn said in his letter, which was dated Thursday and included in a filing with the Securities and Exchange Commission. He said that his biggest concern for Motorola is that board members may wait too long to speak up in the face of continued operational failures, allowing the company to slip into a steep decline. "I assure you with me as a Board member that would never happen," he said.
In a letter to its shareholders, Motorola Chairman and Chief Executive Ed Zander defended the board and urged shareholders not to side with Mr. Icahn, adding that Motorola will not "'simply add" Carl Icahn to the board to avoid a proxy fight.
Mr. Icahn took a step back on his earlier call for more stock buybacks, saying that until the operational problems at Motorola were corrected, "buy-backs and other transactions that might have looked appropriate earlier need to take a back seat." He launched his battle to get a seat on Motorola's board in late January, urging the company to spend all of its $11.2 billion of cash to repurchase its shares. Motorola announced in late March that it would expand and accelerate its stock buyback program, essentially made a concession to Mr. Icahn's demand.
If elected, Mr. Icahn said he would reduce his membership on other company boards to fewer than six and would serve on Motorola's board "with no preconceived notions."
Motorola's share price barely changed on Friday morning. Analysts say Motorola may still have a tough time ahead. Samsung Electronics Co. reported5 on Thursday that its cellphone unit, the third largest by shipment after Nokia Corp. and Motorola, sold more cellphones at higher margins in the first quarter. Industry analysts believe that came at the expense of Motorola.
Motorola is announcing its first-quarter earnings on April 18.
Write to Li Yuan at li.yuan@wsj.com6 and Roger Cheng at roger.cheng@dowjones.com7 |
