Motorola will reach out to Icahn, avoid big buys, regain momentum: CFO21 February 2007

Motorola, the biggest listed US mobile phone maker, will reach out to its new shareholder, Carl Icahn, but wants to focus on regaining momentum, said CFO David Devonshire.
“We’ve done a pretty good job creating shareholder value,” the Motorola CFO said. “He sent us a letter. He asked for a seat on the board. He hasn’t asked for anything else yet.”
Schaumburg, Illinois-based Motorola, which had “a rocky fourth quarter,” wants to focus on spurring profits, integrating January’s USD 3.9bn acquisition of listed Symbol Technologies of New York and private Good Technologies of California, and concentrate on new products, Devonshire said.
Icahn, chairman of listed ImClone Systems who waged a campaign against listed Time Warner last year, said last month he wanted Motorola to use its USD 15.6bn in cash and investments for shareholder benefit. Devonshire said he and CEO Ed Zander are eager to learn details from the New York-based investor.
Motorola probably will not tap its cash to buy a smaller rival, like listed Palm of California, in which hedge funds like Galleon Capital, Renaissance Capital and DE Shaw have acquired a combined stake around 13%, Devonshire said. Palm’s market capitalization is USD 1.65bn, only a fraction the size of Canada’s listed Research in Motion, with a USD 26.5bn capitalization.
But the cash is also needed for new product design, especially as Motorola rushes to develop new phones against listed Nokia of Finland, the world’s biggest mobile set maker; as well as listed Samsung of South Korea; Sony of Japan and Ericsson of Sweden’s Sony Ericsson, as well as the new iPhone scheduled for second half sales by listed Apple of California, the CFO added.
Devonshire said he was confident Motorola can regain momentum, deliver some new advanced phones as well as discount models set for sale in emerging markets like India and China. He also said Apple will probably remain only a niche player in telephony. The two companies had a nearly 20-year semiconductor partnership which ended when Motorola spun of its chip sector as listed Freescale Semiconductor in 2005.
The Symbol Technologies buy, Motorola’s biggest in Zander’s three years as CEO, was intended to bolster the company’s networks business. “They had access, which we didn’t have” to wireless customers in industry, retail and services that Motorola “would have had to bootstrap.” Symbol. The inventor of the bar-code scanner, presented a great opportunity, he said.
The Motorola CFO also said the company was pleased with its third sector, the cable TV set-top and systems lines acquired in the last decade through the purchase of General Instruments. That business pitches it squarely against listed Cisco Systems of California, which acquired listed Scientific-Atlanta of Georgia to enter that business, as well as add video to its Internet product offerings.
Devonshire also said Motorola will survive the resignation of EVP Ron Garrigues, who left to be president of the consumer division of listed Dell of Texas this week. The CFO said he had not spoken to his former colleague but suggested he had left after the fourth quarter’s poor showing. Dell, meanwhile, is also in a turnaround mode after pre-announcing poor fourth-quarter results. Final results are scheduled for next week.
Motorola’s fourth-quarter net income plunged 48% and full-year net fell 20% to USD 3.66bn. The company’s market capitalization is USD 45.8bn.

by David Zielenziger

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