Motorola Takes Steps to Appease Icahn

When it comes to activist campaigns at super-sized technology companies like Motorola Inc., patience is the name of the game, especially when you're Carl Icahn. The megatechnology company said Wednesday it will split into two independent, publicly traded companies, thus separating its struggling mobile-phone business from its broadband and mobility-solutions operations.
This, of course, is a large part of what Icahn wanted. But even with victory, Icahn continues to agitate for change at Motorola, whose stock is still in the doldrums at around $10 a share. Icahn wrote a letter to Motorola that despite its agreement to split the company up he still wants management to install a candidate, Keith Meister, he had put up for election to the board in a proxy contest. Meister directs funds controlled by Icahn. Icahn also raised questions about Motorola's decision to wait until 2009 to complete its breakup plans.
And this contest was not the first time Icahn pressed for changes at Motorola. Icahn started his public efforts in 2007 by launching a proxy contest to nominate a director candidate for the board of Motorola, which had a stock market capitalization at the time of $42 billion. Icahn lost his campaign, but it was close -- he received 717 million votes while the incumbent director attained 931 million.
This was considered a major loss for Icahn, but was it really? Motorola agreed to cut 7,500 jobs, saving it roughly $600 million, in what can be argued was a partial response to Icahn. The restructuring continued when Motorola's CEO Ed Zander resigned.
Icahn himself hiked his stake to 6.3% and took his campaign into high gear. He launched a new proxy contest at the Schaumburg, Ill., company in an attempt to secure records relating to the hiring of senior executives and corporate strategy, especially regarding its mobile-devices business. The raider-turned-activist spoke to institutional investors at a Riskmetrics event in New York on Feb. 6 about activism in general -- but his real goal was to gain support for his insurgency at Motorola. His effort to gain their support appears to have worked -- its impossible to win an activist campaign at a large capitalization company without the support of institutions.
Icahn's success prompted other activist type investors to back his endeavors, and more institutions privately backed his campaign. One of the more interesting supporters is YouTube activist Eric Jackson, who launched his own effort.
Jackson last year used a YouTube video he dubbed "Plan B for Motorola" to attract support from other micro-investors. Like Icahn, Jackson wanted Zander gone, much of the board replaced and a new head of Mobile Devices with a clear strategy. He got the backing of roughly 150 investors with about $600,000 in shares, less than 1% but significant nonetheless. "They didn't move quickly enough, so starting late last year, we started saying that the best course of action, given the extent of the problems in the company, was to break it up," Jackson said.
And now Icahn is still pressing for changes. He still must be patient. - Ron Orol