Monday, March 31, 2008
Carl Icahn & Motorola: Are Big Changes Afoot?
Last May, I wrote this post when the Wall Street Journal's minority-owned 'breakingviews.com' group castigated Carl Icahn for trying to gain seats on Motorola's board.
The post contains two interviews with Icahn at that time, plus some then-current price charts of Motorola and the S&P500 Index.
This past Thursday, the Journal carried an article discussing Motorola's partial surrender to Icahn, in the form of their announcement to spin off the handset unit, though not necessarily until 2009.
Clearly, things have only gotten worse since last spring.
On the face of it, Motorola's decision to simplify its business by ridding itself of the ailing handset business is sensible.
But Carl Icahn wants more assurances that things will change. For example, in the Journal article, he noted that the company's promise to spin off its handset business is not the same as actually getting it done expeditiously.
Further, Icahn reminded investors and the public that he complained last year when management badly missed quarterly performance targets. He still believes the company is poorly-managed, handset business or not. That's why he is still seeking four seats on the company's board.
Will any of this help the troubled communications equipment maker?
Spinning off or selling the handset business will be a good first step, as it seems, as run by Motorola, to be more like a fashion business than a solid equipment business. Having missed with customers after the now years-old, 'must have' Razr line, it is probably better off letting others manage the quixotic unit.
That will leave it with a clearer focus on networking equipment. The good news might be that most of the firm's awful performance since early 2006 has been handsets, and it will now right itself in short order.
Or, the bad news may be that Icahn was right to demand a large cash dividend, because the firm's core communications network business is also now hopelessly behind competitors.
Either way, I know I wouldn't be investing in the firm for some time to come.