Zanders Succession at Motorola Greeted Cautiously by Analysts

With the appointment of Edward J. Zander as chief operating officer and chairman of Motorola Inc. on Tuesday, the company completed a process begun in September with the announced resignation of Christopher B. Galvin, the former CEO and chairman as well as grandson of Motorolas founder. Though the companys stock rose on the news, industry analysts remained more cautious than sanguine about the future of the former technology leader.

Galvins resignation came after much contention—partially caused by Galvins acceptance of a multi-million-dollar compensation package while overseeing the firing of over 60,000 employees in three years—leading some industry observers to comment that Galvin was forced out.

In addition, Motorola over the last few years was hit hard by a slowdown in infrastructure purchasing, even as it saw its lead in wireless handsets be overtaken by Nokia.

“I dont think its enough for me to start jumping up and down,” said Kevin Dede, a senior vice president and research analyst specializing in wireless technology for the San Francisco-based Merriman Curhan Ford & Co. Though he commended Zander for bringing “a little more personality” as the front man of the company, Dede noted that there remain underlying problems; he has not altered his “neutral” recommendation for the companys stock.

One major hurdle Motorola faces, Dede said, is in the wireless handset market. As cell phones become more common, he said, media handling will differentiate models, and this is where Motorola has fallen behind. Dede pointed out that the “hot demand” in the market is for camera phones; Motorola had been caught without a secure supply of the image-processing chips required for such models and has been unable to offer their own product.

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In addition, Dede said, the industrys continued poor capital spending on telecommunications hardware has hit Motorola especially hard. Still, he said, the company does have a positive cash flow and is resizing. Dede also described government communications market as “a plum,” with one contract for connecting police, fire and FBI systems growing to hundreds of millions of dollars.

/zimages/6/28571.gifMotorola recently spun off its Semiconductor Products Sector business. To read the full story,click here.

John Bucher, a research analyst at Harris Nesbitt Gerard, Inc. in Los Angeles, also did not change his take on Motorola stock, leaving his “outperform” rating in place.

“The change was certainly expected,” he said, though he admitted he had looked to the board offering the CEO position to Mike Zafirowski, the companys current president and chief operating officer, with the chairmanship going to a company outsider. Bucher said that hearing Zafirowski avoiding making a long-term commitment to Motorola “adds new risk to the shares.”

Some observers were pleased at the appointment of a Motorola outsider to both positions, Bucher said, though he added, “Im not one of them.”

However, Bucher said he thought Zanders experience at Sun Microsystems Inc., where he lead the software group and became the president and chief operating officer, will serve him well at Motorola. “Sun was at the center of the infrastructure business,” Bucher said, noting that thats where Motorolas strength is currently.

/zimages/6/28571.gifClick here,to read an exclusive eWEEK interview with Ed Zander as he left Sun Microsystems.