Icahn Ups Stake in Motorola

Motorola’s management and billionaire investor Carl Icahn are heading for another showdown.

In a March 5 filing with the Securities and Exchange Commission, Icahn, already Motorola’s largest stakeholder, disclosed that he had raised his stake in the company to 6.3 percent. In all, Icahn or Icahn-controlled entities own 142 million shares of Motorola.

Icahn has said Motorola would be better off by selling its struggling mobile phone division and is pushing for four new board members who are friendly to his interests. Icahn last year failed to gain a seat on the Motorola board.

According to a separate March 5 SEC filing, Motorola urged shareholders to reject Icahn’s bid for control of the board.

“The Board urges you not to vote any proxy sent to you by the Ichan affiliates,” the filing stated. “If you have previously voted a proxy sent to you by the Icahn affiliates, you can revoke it by submitting a timely, later-dated proxy.”

Motorola, the nation’s third-largest cell phone maker, announced in January another sharp decline in mobile handset sales, resulting in an 84 percent drop in fourth-quarter net income. The company said it shipped 40.9 million handset units in the fourth quarter, a dramatic drop from the 65.7 million units shipped a year ago.

Motorola’s mobile devices division represents about half of the company’s sales. After introducing the successful RAZR model in 2004, Motorola has struggled to launch another hit cell phone, driving it from the No. 2 spot among dominant handset makers. Nokia and Samsung are now the top two handset manufacturers.

Icahn: Dump the Handset Unit

Ed Zander’s resignation as CEO last year did little to please Ichan, who said in a December statement, “In my opinion, Motorola should be split into separate companies: a mobile devices company; an enterprise mobility company; a connected home company; and a company focused on mobile networks infrastructure.”

Motorola announced in February that it was “exploring ways in which our Mobile Devices Business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of a great franchise.”

Icahn has preached for months that Motorola needs to dump its handset unit.

“For many months I have been publicly advocating the separation of Mobile Devices from Motorola’s other business and I am pleased to see that Motorola is finally exploring that proposal,” Icahn said in a statement in February. “However, we have previously informed Motorola that we expect to run a slate of directors for the upcoming annual meeting and this announcement by Motorola will not deter us from that effort.”

Icahn said the company “is finally moving in the right direction, but certainly still has a long way to go.”

All the publicity generated by Motorola’s handset travails has overshadowed better news from the company’s other two major divisions: the home and networking segment and the enterprise mobility unit. Featuring television set-top boxes and modems, the home and networking unit increased sales by 11 percent to $2.7 billion. Operating earnings, though, fell 14 percent to $192 million.

The enterprise mobility solutions division saw a 40 percent increase in operating earnings of $451 million on sales of $2.1 billion, largely on the strength of acquiring Symbol Technologies in 2007.