Market Scan
Icahn Rings Up Motorola
Miriam Marcus, 05.07.08, 4:50 PM ET
Carl Icahn is adding to his foothold in Motorola, now that he’s on the board and getting his way.
On Tuesday, Icahn announced he had increased his stake in Motorola to 7.5% from 6.4%. The billionaire now owns 172.2 million of Motorola’s 2.3 billion outstanding shares.
“He’s still a believer in the company, and he’s able to buy shares cheaper now,” said Pacific Crest Securities analyst James E. Faucette. Icahn had first started accumulating Motorola shares when they were selling at almost twice the current price, and now he sees an opportunity to buy lower, Faucette explained.
“Shareholders were intrigued when Icahn first became involved in Motorola and the stock was considerably higher,” Faucette said. Now he’s gained a seat on the board and is increasing his position by buying more stock. Faucette added that Icahn’s Wednesday purchase announcement likely won’t have much effect on Motorola’s share price. “The Icahn effect on Motorola stock is already built in.”
Shares of Motorola fell 38 cents, or 3.7%, to close at $9.88 in trading Wednesday. The stock has been sliding since it hit a recent closing peak of $26.20 in October 2006. Motorola had a hit with its Razr cell phones in 2004, but it failed to stay on top of market trends and is now scrambling to keep up with more inventive competitors. (See "Razr Burn")
Icahn expressed frustration over Motorola's performance in January when the company reported weak earnings. At the time, Icahn owned 3.3% of the company.
In late March, Icahn succeeded in muscling Motorola to spin off its hand-held phone division, saying it had been mismanaged for years. The changes will be made in 2009, under which two publicly listed companies will be created, one focusing on mobile phones and the other on broadband and mobility devices.
Last month, Icahn also succeeded, at least in part, in his hand-picked changes to the faces on the mobile phone maker’s board because the previous "fraternity" lineup amounted to a "quintessential example of everything wrong with corporate America."
Icahn’s choice Keith Meister, managing director of Icahn investment funds, and financial-services stalwart William R. Hambrecht were appointed on April 7 in exchange for the investor’s dropping of litigation against Motorola, where he was trying to gain access to certain materials.
Icahn had also wanted shareholders to elect former Chief Executive Frank Biondi of media conglomerate Viacom and Lionel C. Kimberling, but after getting the company to do what he wants from outside the board, he probably cares less about who he has at the table.
On April 24, the bumbling company announced that a 39.0% plummet in cell-phone sales dragged Shaumberg, Ill.-based Motorola’s first quarter to a widened loss of $194.0 million.
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