What's next for Motorola?

Activist investor Carl Icahn's bid to win a board seat at Motorola appears to have ended, but a lot of work remains for a management team struggling to turn around the No. 2 mobile handset maker.

Motorola issued a press release Monday evening after its annual shareholders meeting held in Chicago stating that early results indicated stockholders had re-elected Motorola's current board of directors and that Icahn, who now owns almost 3 percent of the company, was not elected to the board.

The fight had intensified over the past couple of weeks as Icahn and Motorola sent out dueling letters, press releases and advertisements to try to persuade shareholders to take their side.

Icahn, who initiated the battle in January after Motorola reported disappointing earnings, said he believes the company is being mismanaged. Specifically, he has attacked Chief Executive Ed Zander, questioning his performance and compensation, which totaled $10 million in 2006. He also criticized the current board of directors for not being accountable to shareholders, who have seen their shares in the company lose roughly $20 billion in value.

While Wall Street reacted negatively to the news that Icahn would not be on the Motorola board, sending the stock down slightly on Tuesday, some analysts say that Icahn's absence will likely have little long-term impact on a company that is struggling to keep up in an increasingly competitive market.

"I don't think the Icahn thing is that big a deal one way or another in terms of his ultimate influence," said Scott Swanson, senior analyst at Crowell Weedon & Co. "The principal issue for the company in the near term is getting new innovative products into the market that people are willing to pay a lot of money to buy."

A 3G issue?
Indeed, Motorola, the second-largest handset maker in the world, behind Nokia, is struggling to regain its footing in an increasingly competitive market. For the first quarter of 2007, the company reported a net loss as it resisted matching its competitors' price cuts.

But Zander has promised that the handset division will show a profit for the year. The company's biggest challenge moving forward is finding new products to excite the market that will help it compete against rivals Nokia and Samsung Electronics, which have made gains in recent quarters.

Motorola had seen big success with its popular ultra-thin Razr, introduced in 2004. That product helped Motorola increase its market share from 15 percent to 23 percent by the end of 2006.

More from News.com on this story's topics

Corporate culture

Create an email alert | RSS feed

Cell phones

Create an email alert | RSS feed

Motorola

Create an email alert | RSS feed

See more CNET content tagged:
Motorola Inc., Carl Icahn, Ed Zander, shareholder, Nokia Corp.