Business

Motorola CEO Zander being replaced by COO Brown in January

Friday, November 30, 2007
 Ed Zander, chairman and CEO, Motorola Inc. shows the Motofone, a new phone with a high-contrast reflective display using a new technology invented at MIT and commercialized by E Ink, during his keynote speech at the 2007 International Consumer Electronics Show (CES) in Las Vegas in this Monday, Jan. 8, 2007 file photo. As a result of Motorola acknowledging Wednesday, July 11, 2007, that its struggling cell phone business will be unprofitable at least until 2008, Zander is coming under fire with a grassroots campaign to oust him, and four other board members, led by a group of small investors and includes an online petition, blog and five-minute video manifesto.  (AP Photo/Damian Dovarganes, File)

Ed Zander, chairman and CEO, Motorola Inc. shows the Motofone, a new phone with a high-contrast reflective display using a new technology invented at MIT and commercialized by E Ink, during his keynote speech at the 2007 International Consumer Electronics Show (CES) in Las Vegas in this Monday, Jan. 8, 2007 file photo. As a result of Motorola acknowledging Wednesday, July 11, 2007, that its struggling cell phone business will be unprofitable at least until 2008, Zander is coming under fire with a grassroots campaign to oust him, and four other board members, led by a group of small investors and includes an online petition, blog and five-minute video manifesto. (AP Photo/Damian Dovarganes, File)

Ed Zander is out as Motorola Inc.'s chief executive after a roller-coaster four years that saw him oversee the cell-phone maker's Razr-led resurgence but ultimately bear blame for strategic gaffes and product whiffs that led to its steep decline.

The company's announcement Friday that Zander is resigning as CEO and that President and Chief Operating Officer Greg Brown will succeed him Jan. 1 produced little surprise and a muted reaction on Wall Street. Industry experts voiced skepticism the change will produce a turnaround unless accompanied by a new wave of top-selling phones and other mobile devices.

Regardless, the departure will end a wild ride for Motorola under the fast-talking Brooklyn native, a former Sun Microsystems Inc. president who was widely praised for leading the slumping company's resurgence in 2004-05 and castigated for overseeing its slide since the second half of 2006.

The two-year run of success following the launch of the ultra-thin Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

In a little more than a year, the Schaumburg, Ill.-based company has endured the departure of high-level executives, a Carl Icahn-led proxy battle, a 40 percent drop in its stock price and a sharp decline in its global cell-phone market share to 13 percent from over 20 percent. It slipped from the No. 2 handset maker to No. 3 this year, behind not only Finland's Nokia Corp. but Samsung Electronics Co.

The 60-year-old Zander, who will stay on as chairman until the annual shareholders meeting in May, maintained the decision to go was his alone despite the severe criticism he received for the company's struggles and some calls for his ouster. He told The Associated Press that he had initiated talks with the board of directors about his succession months ago and said he had intended all along to stay only about four years.

"This is what I wanted to do," he said in a telephone interview.

"You'd like to leave when you're at the top of your game. ... You don't like to leave when you have a year like this with mobile devices," Zander said. "But I think we have enough structurally done with this company that when mobile devices does get back to its execution, we're a stronger company than we were four years ago."

Analysts, however, were dubious the board of directors would have given him the extension he needed to stay on as CEO after he reached the four-year mark at the end of December. He needed a strong company rebound to assure his standing with directors and shareholders, and progress in the third quarter was only modest.

Eric Jackson, a Naples, Fla., management consultant and Motorola shareholder who led an online campaign to fire Zander, suspects it was the board's initiative to replace him, and applauded the move.

"This is a company that is in need of new blood and new direction," he said.

Zander will get a rich sendoff. Based on a March 2 proxy filing, his contract with the company calls for him to receive $7.05 million in severance pay as part of an overall package of more than $29.8 million that includes stock, options and health benefits unless he is fired for cause.

He will continue to serve as an adviser to the CEO through Jan. 5, 2009, and until then will continue to receive his regular base salary and benefits.

His resignation left some observers wary about what it might signal about the turnaround effort in the cell-phone unit, which is bigger than Motorola's other, more successful divisions: home and networks mobility, its second largest, and enterprise mobility, which sells computing and communications equipment to businesses.

"While Mr. Zander's departure has been the source of speculation for some time, we had thought that an improvement in mobile devices could possibly grant him a stay," said Citigroup's Jim Suva in a research note. "We now wonder if today's announcement signals yet another disappointment for the handset segment and more meaningful changes that have to occur."

Brown, 47, joined the company in 2003 and had been groomed for the top job, serving as president and COO since March. Prior to joining Motorola, he was chairman and CEO of Micromuse Inc., a network management software company.

He was instrumental in Motorola's $3.9 billion acquisition this year of Symbol Technologies, a maker of barcode scanners and handheld computers, and its $1 billion divestiture of the automotive electronics business last year.

Asked whether he envisions a departure from the company's recent strategy, Brown said he would provide an update in early 2008 on the next steps planned.

"We've made a number of changes already," he told the AP. "We're focused on finishing the year and ensuring a smooth transition."

Analysts are looking less for a miracle from Brown than they are for some oomph from the company's 2008 handset models, which it is expected to unveil starting at the Consumer Electronics Show in Las Vegas in January.

"Motorola's problems extend behind its leader," Dave Novosel of the Gimme Credit bond research firm said in a note to investors. "The company sorely needs a refreshed product portfolio to capture the tastes of cell phone customers."

CIBC World Markets analyst Ittai Kidron called Brown a "solid operational manager" who isn't expected to bring drastic change, although other experts said another wholesale restructuring is possible.

Motorola shares rose 23 cents to $15.88 in afternoon trading. The stock is down more than 20 percent in 2007 and far off its six-year high of $26.30 reached in October 2006.

(Copyright ©2014 by The Associated Press. All Rights Reserved.)

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