Icahn Loses Bid for Motorola Board Seat

CHICAGO -- Carl Icahn may not have succeeded in his fierce campaign to land a seat on Motorola Inc.'s board.

But the billionaire financier's proxy fight with the world's No. 2 cell phone company might not have been an outright failure, either.

"Whether Icahn is physically on the board or not, he's made his presence felt," said Motorola analyst John Slack.

The 71-year-old said he plans to retain his 2.9 percent stake in the Schaumburg-based company and appeared upbeat after Monday evening's shareholder meeting. He said he hasn't ruled out another board bid next year.

"I think we gave them a wake-up call," Icahn said.

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Icahn announced his campaign for a board seat in January, saying he wanted to increase the company's debt level and return more cash to investors. Since then, he's criticized company leaders for failing to quickly fix their once-golden mobile device division and said the board should replace Chief Executive Ed Zander if the company can't fix quickly fix its financial prospects.

Last month, the company posted its first quarterly loss since 2004 and Motorola has lost about one-third of its market value since October.

"They would be well advised to pick up on the essence of what Carl Icahn is trying to say," said Espen Eckbo, the director of Dartmouth's Center for Corporate Governance. "If the sitting management team and the board implements some more aggressive strategies for shareholders, (he) may have achieved what he wanted."

There are already signs that the agitation may be working. Since Icahn entered the fray, Motorola announced a management shuffle and increased its share repurchase program.

Zander said Motorola would announce a series of new handsets next week in New York, which company leaders hope will revive its cell phone division that has suffered as sales of its once-blockbuster Razr phone declined.

"In 2004 and 2005 and most of 2006, this is the vision that knocked the cover off the ball," he said. "We have to get it back on track."

Motorola, the world's second-largest handset manufacturer behind Nokia, did not release the preliminary vote totals and said final results would not be available for weeks.

Zander said in a statement after the vote that he "valued" Icahn's input and that the beleaguered company would continue working to fix its finances. Motorola said Icahn was unqualified for a spot on the board.

"During the past few months, we have met with and listened to a large number of our stockholders, including Mr. Icahn, and we value their insights and perspective regarding Motorola," Zander said. "We remain steadfast in our commitment to continue building value for all of our stockholders."

At the shareholder's meeting in Chicago, Icahn received applause from many of the 700 people who filled an auditorium. But he conceded what he thought was a likely defeat in a short speech.

"What I wanted to do with Motorola was go on this board just to make sure, to make sure that this board is going to make management accountable," Icahn said. "But I don't know if it can happen without somebody there to make sure that the numbers are being met."

The company said dismal sales would likely continue to vex its earnings at least through the second quarter.

"This is akin to trying to turn an aircraft carrier really quickly. You can't do it," Slack said. "I think the important thing is to put the distraction behind them."

Icahn's bid divided more than shareholders.

Leading proxy advisory firms lined up in opposing camps last month _ two recommending that shareholders vote for the dissident investor and a third siding with Motorola.

Motorola had been on a two-year hot streak, thanks to the popularity of its Razr phones. Then it aggressively cut prices of Razrs and other high-end phones, especially in emerging markets, to boost market share. Profits dropped steeply.

"I think next Tuesday when they start releasing the new handsets, that's as important to Motorola as the shareholder meeting today," Slack said. "It's all about getting compelling products out in the market."

Motorola stock was unchanged at $18.08 Monday.

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