Motorola Replaces Chief With an Insider
Motorola said yesterday that its chief executive, Edward J. Zander, was stepping down, a development applauded by the dissident shareholder Carl C. Icahn, who said the company should use the opportunity to split into four parts.
Edward J. Zander is resigning as chief executive of Motorola. He will keep ties to the company.
Gregory Q. Brown
Wall Street had expected Mr. Zander to step down as the company struggled to revive its troubled mobile division. He is being succeeded by Gregory Q. Brown, the chief operating officer who has led four of the company’s business units since his arrival four years ago.
Mr. Icahn applauded the ouster of Mr. Zander, saying it was long past due, but said it was not nearly enough to turn the company around.
“I believe that the steps announced today do not even begin to address the major problems at Motorola,” Mr. Icahn said.
A split would allow the wireless products division to attract top-flight executives, he said.
After seeing its share of the cellphone market surge a few years ago on the runaway success of the fashionable Razr phone — the company sold a record 100 million of the devices — Motorola failed to refresh its product line. It began to cut prices, which hurt its profit margins. Motorola’s share of the mobile phone market has fallen to third place, behind Samsung and the market leader, Nokia.
“The greatest challenges are in mobile devices, returning it to profitability and extending its product portfolio,” Mr. Brown said in an interview yesterday. “It improved significantly in its move to profitability, but there’s a lot more work to do.”
The news of Mr. Zander’s departure had little effect on Motorola stock. Shares closed up 32 cents at $15.97 in regular trading.
Mr. Zander, 60, will continue to serve as chairman until the annual shareholders meeting in May. Mr. Zander will also serve as strategic adviser to the chief executive and as a nonofficer employee through Jan. 5, 2009, the company said.
It said Mr. Zander was entitled to a $5.3 million bonus and to all options and restricted stock units that vest before his retirement. But he will not receive a severance payment or any unvested equity because he is stepping down, the company said.
Mr. Brown, 47, joined Motorola in 2003 from Micromuse, a network software company, and became president and chief operating officer in March. Mr. Zander said that he told the board two years ago that Mr. Brown would be a good candidate to lead the company.
“I began throwing everything but the kitchen sink at him,” Mr. Zander said in an interview. “He is a known quantity and a great leader.”
Mr. Brown managed the $3.9 billion acquisition of Symbol Technologies, the second-largest transaction in Motorola’s history, and is credited with returning the company’s automotive business to profitability. He also expanded the company’s government and public safety business. “Thank God Greg developed as fast as he did,” Mr. Zander said.
But some Wall Street investors analysts had thought Motorola might name a successor for Mr. Zander from outside the company, perhaps seeing an opportunity for a more significant change of direction.
“This says the board likes the plan and is focused on execution,” said Bill Choi, an analyst with Jefferies & Company. “We’ll have to wait and see.”
Paul Sagawa, an analyst at Sanford C. Bernstein & Company, described Mr. Brown as a “blank slate.” The key will be whether, under his leadership, Motorola can produce the kinds of technologies that can help it turn itself around, Mr. Sagawa said. “The cavalry has been slow in coming when it comes to new products,“ he said.
Mr. Zander insisted Friday that the decision to leave now was his own, and that he was looking forward to time with his family. Mr. Zander came to Motorola in 2004 about a year after resigning as president of Sun Microsystems. At the time, he was serving as a managing director at Silver Lake Partners, a private equity firm in Menlo Park, Calif.
Mr. Zander has felt considerable shareholder pressure this year, most notably from Mr. Icahn, the billionaire investor, who led a fight for a seat on Motorola’s board. But at Motorola’s annual shareholders meeting in May, Mr. Icahn lost a proxy fight for a board seat, and Mr. Zander promised investors a turnaround this year.
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