Risk & Compliance

Icahn, Motorola Headed for a Showdown

Billionaire hedge fund activist Carl Icahn plays hardball with Motorola in a move that will likely set off a proxy fight at the upcoming annual mee...
Stephen TaubApril 16, 2007

Carl Icahn is turning up the heat on Motorola. The billionaire corporate raider cum hedge fund activist asserted in a letter sent to shareholders on Friday that he was disappointed that the company did not add him to the board of directors. He wrote that the appointment would have allowed Motorola to avoid a proxy fight at its May 7 annual meeting. “I am willing to expend the time, effort and money necessary to seek election through this proxy contest so that all of us will have a shareholder voice on the Motorola Board,” he wrote.

Icahn also asserted that he had “significant business experience” to address the company’s problems, specifically citing what he called the company’s surprise fourth-quarter drop in earnings for its Mobile Devices segment and the recently announced expectations for disappointing results throughout 2007. ”Motorola’s problems reflect not only operational failures, but are also symptoms of a passive and reactive [b]oard,” he told shareholders in the letter. “Until our operational problems are corrected, buy-backs and other transactions that might have looked appropriate earlier need to take a back seat,” Icahn added. “Otherwise I come to Motorola with no preconceived notions.”

Icahn, who controls 2.9 percent of Motorola’s stock, asserted he can make a positive difference at Motorola, given his nearly 40 years spent analyzing, owning and running companies. Insisting that large investors make the best board members, he added that the alignment of his interests with those of the company and its shareholders make him “uniquely suited for this position.”

In a separate filing, Motorola told shareholders that it did not believe Icahn’s “qualifications” would strengthen the board. “Your [b]oard’s nominees are actively engaged and keenly aware of their duties to stockholders,” the company wrote in a letter to shareholder. “Along with management, they continuously review strategies for improving stockholder value and have been proactive in implementing changes where those changes would advance that objective.” However, the letter stressed that the company would not “simply add” Icahn to the board to avoid a proxy fight. “Your Board is unanimous in its opposition to Carl Icahn’s nomination,” the company stated.

In March, amid a shakeup designed to turn around the company’s flagging performance, Motorola announced that its chief financial officer, David Devonshire, would retire. Devonshire’s departure may have been hastened by demands from Icahn that the struggling technology company boost returns to shareholders. Board member Thomas J. Meredith, was named acting CFO.

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