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.

[stopher2475]

RAZR software stinks.

I bought a RAZR used when my Sony Ericson died. It's a good phone but I'm really dissappointed with the interface. It's just clunky and less functional compared to my SONY. Can't sync via bluetooth. Sony's software is just slicker. Also it seems like the hardware has more power. The RAZR does have good predictive text though.

[Macsaresafer]

RAZR does stink, but you're being screwed by Verizon.

I have a Razr, and I hate it. The software is buggy. It drops the
connection to the headset randomly, and sometimes it thinks
the battery is 'invalid.'

The Razr can however, sync via bluetooth. I do it all the time,
but I don't have Verizon. They hobble all of their phones so that
you have to use their VCast 'service' to transfer files and
calendar information. Put a song on your phone? They charge
more than the iTunes $0.99 per song AND they charge you for
the air time to download it!

[jacobdol]

cannot agree more - UI is as unintuitive as it could be

i have the same problem. I normally use Sony Ericsson phones but
was forced to get a motorola since it's the only 3g phone for
Cingular frequencies. Actually there is an LG phone but LG is years
away from understanding what cell phone UI is and what
functionality it should have. In any case razr ui is super unintuitive
and clumsy. It is also full of bugs. I wish motorola just copied Sony
Ericsson ui.

[Ian Kirkland]

just like

"Meanwhile, Motorola will also soon face competition from a
company with no cell phone expertise. Apple is expected to release
its new iPhone in early June. That phone, which will be available
only through AT&T's Cingular Wireless, is already attracting a great
deal of attention."

NO CELL PHONE EXPERIENCE, just like the iPod-no mp3 player
experiencee. sometimes no experience is a good thing!

[gniz]

Software tightly coupled with Hardware

Seems like Motorola should begin developing applications/server side services that work great on their phones. This is their problem. Sure hardware form factor has been the big seller for the last few years and what they did with the razor was similar to what Apple was able to achieve with the ipod, but they didn't build itunes, and an ongoing franchise in anything other than all the spin-offs of the razor. I am not saying they need a music hub (too late), but something equivalent. Every US carrier needs to differentiate, and Motorola could help them, but there doesn't seem to be much effort on Motorola's part, or maybe it is the carriers? This may be outside their core competency, but to survive they will need more than hardware.