Armed only with more promises to revive the badly flagging company, Motorola Inc.’s CEO Greg Brown and fellow board members took a verbal beating from their shareholders at last week’s annual shareholder meeting in Rosemont, Ill., according to news reports.
Yet the company’s board received shareholder approval for most of its recommendations, including the seating of two of investor Carl Icahn’s allies on the board. In April, Motorola and Icahn reached an agreement that the company would seat one ally and recommend that he and another Icahn associate be elected to the board, in exchange for certain guarantees from Icahn.
In an exchange of promises, Icahn and his allies have agreed to drop any ongoing litigation and refrain from proxy battles or public attacks on the board, while Motorola pledged to consult Icahn and seat his two allies on any committees considering its plan to split in two and to not adopt any takeover protections, or “poison pills,” for an independent handset business.
<span class=cr_red?Changing of the guard
The meeting marked the end of former chairman and CEO Ed Zander’s controversial tenure at the company. Brown assumed his position on Jan. 1 and last week’s meeting marked board member Dave Dorman’s ascent to chairman.
Shareholders did buck a recent trend by narrowly approving a “say-on-pay” proposal that would allow them an advisory-only opportunity to approve or disapprove of executive compensation packages; such measures have been receiving fewer approvals at corporations across the U.S., according to The Washington Post.
Yet shareholders overwhelmingly defeated a proposal from their ranks on a policy to recoup unearned bonuses from underperforming executives.
Apparently, Icahn did not attend the meeting and Keith Meister, his business associate and one of two allies to be seated on Motorola’s board (the other is William Hambrecht), declined to comment on the proceedings.
But in the wake of the meeting, Icahn upped his holdings in Motorola to more than 172 million shares valued at more than $2 billion, or 7.6% of the company, up from a pre-meeting holding of 145 million shares, or 6.4% of the company.
Now the work begins
In fact, the meeting, which lasted only 90 minutes, was in some ways perfunctory – the real business at hand for the company lies ahead.
On the heels of another dismal quarterly performance, Motorola’s board and executive management must now address their plan to split the company into two publicly traded companies, find an able leader to return the handset division to profitability and stop the company’s rapid descent in market share.
At the shareholder meeting, Brown did not deliver new details on the search for a leader for Motorola’s ailing handset business nor did he give details on the effort to split the company into two publicly traded companies, according to reports.
Instead, Brown simply acknowledged that the company had had a “punishing year,” politely thanked shareholders for their scathing remarks and reiterated that splitting the company in two was the best course to return the handset business to profitability. The company said earlier this year it would create one company to run its connected home, network mobility and enterprise mobility businesses and another focused on handsets.
In fact, two weeks ago, Brown reported that company-wide revenue was down nearly 40%, operating losses had nearly doubled and handset shipments were down drastically from the year-ago quarter. The company’s value has declined nearly 60% since it began its tumble in October 2006, according to Reuters. The company’s global market share has collapsed to less than 10% from a former high of more than 22%.
Only one way to go
Though Brown apparently promised shareholders “wonderful things” to come and an “aggressive” pursuit of a new handset lineup, two weeks ago he said that the company had only an “embryonic portfolio.”
Analyst Ittai Kidron wrote in a note to investors after Motorola reported its first-quarter results that “it seems management has a grasp of the problems and at least some plans to address them.”
The company’s guidance on the current quarter suggested that the handset business has bottomed out, Kidron wrote.
“But until the portfolio gets overhauled – look to late 2008 and 2009 – and new mobile device management is put in place – hopefully, soon – it is difficult to have confidence in a turnaround,” the analyst said.
Meanwhile, Kidron added, the company’s non-handset businesses were “holding the fort.” Home and Networks Mobility slightly exceeded expectations in the first quarter, though Enterprise Mobility Solutions came in under expectations, though long-term trends were positive.
