Hot Research
THURSDAY, SEPTEMBER 2, 2010
Icahn's $111 Million Motorola Buy
By AVI SALZMAN | MORE ARTICLES BY AUTHOR
The activist billionaire has now raised his stake to 10.7%.
ACTIVIST BILLIONAIRE CARL ICAHN continues to plow money into Motorola as the company prepares to split off its mobile-phone and set-top box unit into a new company.
Icahn bought about 14.8 million shares in the communications-device maker between Aug. 26 and Tuesday for $111 million, or about $7.50 per share. Icahn now owns about 250 million Motorola (ticker: MOT) shares, or a 10.7% stake.
Neither Icahn nor Motorola would comment on the buys, but Icahn has not been shy about his opinion that Motorola needed to split up the company.
Icahn has been accumulating shares since at least 2007, when he took a 1% stake and later agitated to get two of his nominees onto the Motorola board. Motorola agreed in 2008 to split off its mobile-phone and set-top box divisions into a new company, and yesterday revealed in a filing that it would plow $3.5 billion in cash and cash equivalents into the new company when the split occurs.
The mobile-phone division has generated buzz in recent months as it had success selling phones with Google's (GOOG) Android operating system.
Once the split occurs, Motorola will focus on selling devices such as radios, bar-code scanners and other technology, many of them to government agencies.
"I imagine he still believes there will be more value in Motorola once the company splits up," says analyst Rahul Khanwalkar of Jefferies & Co., who rates the shares at Hold.
Jonathan Moreland, research director at InsiderInsights.com, says that investors who follow Icahn into companies often walk away richer.
"All you have to do is look at his past actions and it certainly paid off to follow Mr. Icahn in the past, most recently with Lions Gate," he says. "That's a track record you can take to heart."
Icahn made a hostile bid to take over Lions Gate Entertainment (LGF) for $7.50 a share on Tuesday. Lions Gate shares have risen 24% this year.
Motorola shares, however, have not seen much bounce since Icahn began working to change the company. They have lost more than half their value since he began accumulating a large stake. But Moreland thinks the company could be a smart buy now.
"If you're looking for something to go long on in this tricky market, this is the type of special situation that should be up your alley," he says.
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