Zander exits Motorola on his own terms: Investors exhale, gird for long haul as Brown tries to resurrect revenues

Swapping out a chief executive sends a message of change.
In the case of Ed Zander’s long-anticipated departure from his CEO position at Motorola Inc., the message-new leadership-appears to require more information.
Investors, analysts, employees and media will want to learn more about the company’s direction. Motorola’s core business in handsets continues to suffer and because product development typically is a closely guarded secret, there’s much speculation about the company’s post-Razr platform direction.
And those updates will likely come from Greg Brown, newly anointed CEO as of the first day of 2008. Brown currently serves as the company’s COO, since his appointment to that post in March. Prior to his appointment as COO, Brown led the company’s networks and enterprise business. Brown will have countless, high-profile opportunities to address the company’s future, as early 2008 offers a major trade show or financial analyst conference every month; Motorola’s own shareholders meeting is in May.
Zander announced Nov. 30 that he would step down, retaining his position as chairman of the board of directors until the May shareholders meeting.
The news that Zander’s decision was his own was reinforced by the lack of a severance package, which would be triggered if the company’s board had fired him, according to Paul Hodgson, a senior research associate specializing in executive compensation at The Corporate Library.
Hodgson said that if Zander had quit or been terminated for cause, he would have been eligible for a $28 million severance package, which would have to be reported by the company within 48 hours of the news of Zander’s fate. Instead, Zander will receive full salary and benefits through 2008 as an adviser to the CEO, for which he’ll receive salary and benefits valued at about $10 million, Hodgson said.
The arrangement is a fraction of the value of payments made to departing CEOs in the financial services sector-measured in the hundreds of millions of dollars-Hodgson said. But, based on the decline in Motorola’s stock value during Zander’s tenure, Zander clearly had not been able to restore the company’s fortunes.
According to Motorola’s statement on Zander’s departure, it was “the culmination of a thoughtful and disciplined process of succession planning”-implying that both Zander and Motorola’s board had sought a dignified departure, thus its timing, rather than while both parties were under acute pressure from external events. (One such external event was activist investor Carl Icahn’s unsuccessful attempt to earn a seat on Motorola’s board in May; Icahn had campaigned for Zander’s ouster.)
But whether the mutually agreeable timing was triggered by “succession planning” or more grim financial news to come may become apparent when the company reports fourth-quarter earnings early next year.
According to Maynard Um, analyst at UBS, Brown’s focus will be to turn around the mobile devices business, which has accounted for the bulk of Motorola’s profits. Brown also may sell off non-core assets, though Um said such sales “in current market conditions could be a challenge.”
“We do not see an immediate fix for (mobile devices) and still believe it will take the better part of 2008,” Um wrote in a note to investors.
Zander, hired in 2004, had presided over the rise and fall of the hit Razr handset, which may well become a case study in business schools on the vagaries of developing and managing a hit consumer-electronics product. Motorola had, at the height of Zander’s management, attained more than 20% global market share, which has dwindled to about 13%, according to data from Gartner, giving up the No. 2 global ranking to Samsung Electronics Co. Ltd.
As the other four, top handset makers engaged in continual innovation and developed broad product portfolios, Motorola had become fixated on upgrading its Razr handset and on spinning off variants of a Razr family. Though platform-based manufacturing models are cited for their financial sense, the handset market over the past two years has evolved too rapidly for any company to overrely on a single platform.
Motorola focused on selling as many Razrs as possible, using steep discounts to gain market share at the expense of profits. A lunge after market leader Nokia Corp. could not match the Finnish company’s long-term development of its portfolio, global distribution channels and manufacturing efficiencies.