The Last Days of 'Fast Eddie' Who is Out of Scapegoats and (Almost) Out ...
... of Motorola, although he is still COB until the upcoming annual meeting and on the payroll at his CEO salart as an advisor to Greg Brown until Jan. 5, 2009.
Below are three very good articles from 2007 on his last days as CEO (thru January 1, 2008) (the 1st previously posted and the 2nd linked by our modreator) ...
>> Motorola's Zander: On Razr's Edge
A third-straight quarter of missed financial targets steps up pressure on the man at the helm of the world's No. 2 handset maker
Roger O. Crockett
BusinessWeek
March 22, 2007
tinyurl.com
In January, when Motorola Chief Executive Ed Zander reported figures that missed analysts' estimates, he lamented how matters "can get away from you." Less than two months later, they've slipped even further. Amid sinking performance of his flagship mobile-phone business, Zander on Mar. 21 ratcheted down financial targets for the first quarter and the full year, and announced a dramatic reorganization of top management.
The phone unit is under so much pressure that Motorola (MOT) now expects first-quarter sales to be in the range of $9.2 billion to $9.3 billion, down more than $1 billion from its January forecast of $10.4 billion to $10.6 billion. And the company anticipates a loss in the range of 7¢ to 9¢ a share, rather than the 17¢ profit analysts were expecting. The first quarter "will be difficult and disappointing, and I also anticipate Q2 will be difficult," Zander said in a conference call with Wall Street analysts. Investors pushed the stock down nearly 5%, to $17.85, in after-hours trading.
Missing in Action
To help stop the bleeding, Zander promoted his most trusted lieutenant, Greg Brown, to president and chief operating officer. Brown joined Motorola, where he led the Networks & Enterprise division, in 2003. His lofty credentials—he's the former head of network-management software company Micromuse and has held several top positions at telecom titans including Ameritech and AT&T (T)—long made Brown a candidate for the No. 2 post. Zander told BusinessWeek in an interview that the move had not been made earlier because Brown had his hands full integrating recent acquisitions Good Technology and Symbol Technologies.
With financials mired, Zander also announced that Thomas Meredith, 56, will step in as acting chief financial officer as of Apr. 1 as David Devonshire, 61, retires. It's not clear whether Devonshire made any gaffes, but he was never a favorite among Wall Street analysts. Meredith, a Motorola board member, is a general partner of the investment management firm Meritage Capital and chief executive of MFI Capital. He is expected to help Motorola focus on driving profitability and to pull the phone unit out of the red.
Despite the high-level management infusion, it's Zander's job that could be on the line. When the Motorola board picked him to take over for the company founder's grandson, Chris Galvin, in 2004, Zander sent a jolt through the company with his enthusiasm, no-nonsense focus, and sense of urgency. But as the company prospered, largely on the soaring success of the Razr, Zander pulled back. He left much of the phone division's strategy in the hands of Ron Garriques, a hard-driving young executive who headed the unit.
Losing Patience
Garriques focused the team on building cell-phone market share and did so well that many expected Motorola to usurp Nokia (NOK) in global share by this year. The strategy backfired as the company failed to follow the Razr with equally successful phones. Although volumes rose, operating margins deteriorated. Zander and Garriques feuded over strategy, sources say, and Garriques bolted for Dell (DELL) last month. "We can't chase market share for market share's sake," Zander told BusinessWeek. "It's like a bad habit that we have to break."
Over the last couple of months, Zander has spent most of his time in Libertyville, Ill., home to the cell-phone unit. And he's visited several carriers, including Verizon (VZ), Sprint Nextel (S), and AT&T's Cingular, in a bid to get his mobile-phone business on the same page as Motorola's biggest customers. While on the ground, one thing has become clear: Things are worse than he thought. Innovation has slowed. Execution is poor. In January, when Motorola announced a lackluster fourth-quarter performance and cost cuts in a meeting with analysts, "we thought we had things under control," he says. Since then, "It occurred to us that things were not moving fast enough."
Zander promised investors on Mar. 21 that the mobile-phone business would improve by the second half of the year and return to profitability for the full year. There's no question the board of directors is watching closely. While sources say Zander has the support of the board for the moment, there are those whose patience is wearing thin. "I hear lots of complaints [about his failure to make big lasting changes]," says one banker. "He's been there three years now: A good CEO changes the culture in that much time."
Deal Possibilities
The push for change is coming at Zander from all angles. Investor Carl Icahn has been agitating for Motorola to use a substantial amount of its $11-plus billion in cash for stock buybacks. And amid all of the disappointing earnings news and management shuffling, Motorola also announced Tuesday that it has accelerated its repurchase of $2 billion of common stock and increased its existing share repurchase program to $7.5 billion. That may not be enough to get Icahn off Zander's back.
Even if it does, the CEO has much more to worry about. As Motorola struggles, private equity players are circling. Sources on Wall Street say a deal is not out of the question. Motorola's woes and collection of vast assets make it a perfect candidate for any one of the big private equity firms. One banker says a deal could even happen in the mid-20s-per-share range, just above where Motorola is trading now, "and you could still get a good return."
Motorola is not commenting on any deal possibilities. And Zander says he will reveal more detail about how he plans to better execute in the cell-phone operation on Apr. 18, when Motorola announces first-quarter earnings. He'll need to be convincing. Right now, "they have not really addressed how they are really going to fix and turn around the mobile-phone biz," says Albert Lin of American Technology Research. "It's not enough for most shareholders."
Crockett is BusinessWeek's deputy Chicago bureau chief. With Arik Hesseldahl in New York and Peter Burrows in Silicon Valley. ###
>> Motorola's Zander "Out of Scapegoats"
Roger O. Crockett
Olga Kharif
BusinessWeek
July 12, 2007
tinyurl.com
In mid-May, Motorola's beleaguered CEO Ed Zander was starting to feel optimistic. Zander had just unveiled a new phone lineup and for the first time in months, headlines would focus on something other than missed financial targets (see BusinessWeek.com, 5/16/07, "Motorola's Gamble: Substance over Style"). "I think we're seeing the transformation beginning," he told BusinessWeek in an interview after the event.
Any change for the better was woefully short-lived. Two months on, Motorola (MOT) said sales would miss forecasts for the third straight quarter and that the company would suffer its second consecutive loss. The worsening outlook is stoking Wall Street's impatience with Zander and causing a growing number of analysts to hypothesize that the CEO may be headed for the exits before long. "A number of key executives around Mr. Zander have changed," says Lawrence Harris, an analyst with Oppenheimer & Co. "By yearend, if we don't see significant improvements, we could see more changes."
The Buck Stops
The impetus for the latest round of bearishness was Motorola's announcement late on July 11 that second-quarter sales were $8.6 billion to $8.7 billion, down from an earlier forecast of $9.4 billion, and that continuing operations had a loss of 2¢ to 4¢ a share. Worse, the bread-and-butter cell-phone unit is no longer expected to be profitable in 2007—something Zander repeatedly encouraged Wall Street to expect this year. "Motorola's handset product line is in a bit of disarray right now," says Mark McKechnie, an analyst with American Technology Research. He added that the company's once-sizzling ultraslim handset, the Razr, "lost favor with consumers and carriers."
Zander too is losing favor with his core constituency: shareholders. Until recently, much of the blame for the ailing mobile-phone business was laid at the feet of Motorola's former cell phone czar, Ron Garriques, who was criticized for chasing market share at the expense of profitability. But in the absence of Garriques, who bolted for Dell (DELL) in February, the buck stops with Zander, investors say. While he has aggressively cut costs by shedding jobs, problems persist. "A lot of people are really tired of him blaming everyone else," says Michael Mahoney, managing director of EGM Capital. "Motorola has a problem, and he is running out of scapegoats."
No. 3 in Handsets?
Mahoney is not alone. Motorola shares rose almost 3% in the hours before the company's dour sales announcement amid speculation that Zander could be about to resign. The sentiment was stirred by an activist investor, Eric Jackson, who on July 9 published a statement online titled "Motorola Plan B"—an attempt to fuel a campaign to oust Zander. Jackson, CEO of consulting firm Jackson Leadership Systems, laments Motorola's performance vis-à-vis bigger rival Nokia (NOK) in the years since Zander took the helm. "We don't believe this past performance and the currently articulated strategy for a turnaround is sufficient or acceptable," Jackson wrote.
"This company has a leadership and a mobile product problem which needs to be corrected—not in 6 months from now, after it falls further behind its competitors."
Zander was not available for comment, but a Motorola spokeswoman says, "The current management team—Ed, COO Greg Brown, and CFO Tom Meredith—are working on restoring profitability for mobile devices and moving forward with a strategy to fix the business."
That fix is becoming increasingly urgent, as Motorola slips among handset vendor ranks. In the second quarter, Motorola likely lost its No. 2 position in global handset shipments to Samsung, expected to have shipped 38 million units to Motorola's 36 million, estimates Neil Mawston, associate director at consultancy Strategy Analytics. "If our Samsung forecast proves correct, this will be the first time ever that Motorola has lost its second position to Samsung," he says.
And market-share losses might be exacerbated now that Apple's (AAPL) iPhone is on the market. Many iPhone buyers appear to be ex-Razr users, says Ken Dulaney, an analyst with Gartner (IT). "If more consumers move to the iPhone, Motorola could be affected," says Harris at Oppenheimer.
Ill Will Growing
As fervently as some investors want change, Zander has shown staying power. In May, investors voted down a proposal that would have given Carl Icahn a seat on Motorola's board and dealt a big no-confidence vote to Zander (see BusinessWeek.com, 5/7/07, "Motorola Showdown: Icahn vs. Zander"). A signal that Zander is still very much in charge, at least for now, is the appointment of Stu Reed as the new head of the phone unit. Reed takes over for Ray Roman and Theresa Vega, who were named co-heads of the business after Garriques' departure. But sources close to Motorola say that Zander was never fully comfortable with Roman in charge. Reed, on the other hand, is a handpicked Zander guy, snatched from IBM (IBM) in April, 2005. There, Reed held executive roles in manufacturing strategy, process, and information technology for 20 years. He has headed up Motorola's supply chain, and is generally well regarded inside and outside Motorola. "I like seeing him come over," McKechnie says. "The hope is he will help Motorola control costs."
Sober cost management will indeed serve as a useful crutch, but it's Zander who has to demonstrate that he can stop the company's bleeding and turn it around—fast. Ever since the fast-talking former Sun Microsystems (SUNW) executive left the private equity world to take the reins at Motorola, his energy and impatience have been viewed as the right leadership medicine for a company formerly led by the contemplative and cautious Christopher Galvin, the founder's grandson. Contrarians grumbled that Zander's success was really based on strategy implemented by Galvin's team before the former CEO was ousted in 2003.
With each passing bad quarter the ill will is growing. Compared to the previous CEOs, "Zander's style is a little more abrasive, and a little less gentlemanly," Mahoney says. "You get a sense that he is more of a show horse vs. performance horse." With so many problems plaguing the company and changes under way to try and fix them, Motorola announced that it would push back its annual analyst meeting from July to September. By then, Zander will either be stepping on stage to show some tangible signs of recovery in mobile phones, or perhaps the stage will have been handed over to a new head horse. ###
>> Serious Business at Motorola
Adam Lashinsky
FORTUNE
November 30, 2007
gowest.blogs.fortune.cnn.com
Ed Zander, Fast Eddie to some of his Silicon Valley pals, is a regular wiseacre. When I caught up with him - and his successor, Greg Brown - Friday morning, right after Motorola (MOT) announced he’ll step down Jan. 1 as chief executive of the venerable cell-phone maker, Zander was on his way out the door to speak at the upcoming World Economic Forum meeting in New Delhi. “I’m out there trying to sell phones,” he cracked, implying that his hastily announced departure doesn’t mean he isn’t still flying the flag on Motorola’s behalf.
Motorola is portraying the “transition” in the CEO suite from Zander to Greg Brown as a long planned and orderly move. Curious, then, that when I asked Brown if he had a contract and what its term was he told me that he didn’t yet have one but that such matters would be decided next week. The Motorola board, which fired Chris Galvin just before the company’s fortunes were about to improve, clearly thinks ahead. (Incidentally, Motorola wants it understood that Zander isn’t receiving severance; He will stay on as chairman until the next annual meeting and then as an advisor to Brown until Jan. 5, 2009 — at his full salary as CEO. Sound like a sweet way to say bye-bye to me.)
For a while it looked like Ed Zander was just what Motorola needed, a fast-paced guy from the technology business, not the cell-phone business, to shake up a sleepy culture. But Zander obviously didn’t get the job done. He dissed Motorola’s customers and oversaw the slippage in mobile phone market share from No. 2 to No. 3.
On Friday, Zander didn’t have a lot of good to say about the former team running Motorola’s cell-phone business. “The management in mobile devices made calls that were dead wrong,” he said, referring not so much to massive price slashing on the popular Razr as to the slow-footed move into so-called 3G (for third-generation) multimedia phones. That particular slam was directed at a young guy named Ron Garriques, who headed that division, which is most of Motorola’s business today, before high-tailing it out of Motorola just before the you-know-what hit the fan. Garriques today is part of the crack team turning around Dell (DELL).
Zander didn’t completely distance himself from the Razr debacle, saying that “we were on a roll there” and that “if we had called some of these things right it would have been a phenomenal story, not just a good one.” I happened to write a story about the hugely successful team of engineers who created the Razr. Care to guess the names of two business guys who were, at best, on the periphery of that project and who craned really, really hard to get into the Fortune photo shoot for that article? Ed Zander and Ron Garriques.
I asked the 60-year-old Zander what he accomplished in his four years at Motorola. He stressed a stronger balance sheet, better financial discipline, a rejuvenated cable-equipment business, 13 acquisitions, a valuable patent portfolio, “thought leadership” on Wimax wireless technology, and a Motorola culture that now values fighting and winning. “It’s hard to see all the success when mobile devices isn’t doing well enough,” he says.
As for Brown, who is 47, I’ve known him since he was a junior executive at Ameritech, where his big brother Dick was vice-chairman. (See Colin Barr’s amusing take on Brown’s big bro.) Brown will be completely different from Zander. He’s equally ambitious but wears his ambition more quietly. (Fortune presciently identified Brown as a rising star nearly two years ago.) When I asked Brown what he’ll do as CEO, he instead focused on what he’s done this year as president of Motorola, primarily changing out senior executives in his biggest units as well as mounting a continued attack on Motorola’s cost-structure. I asked him what advice brother Dick had given him. He said his brother told him being CEO would be the best and worst jobs at the same time.
In contrast with Zander, there was little joviality in Brown’s voice. He’s got a big job ahead of him. ###
- Eric - |
