Zander out at Motorola

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Zander out at Motorola
Investors exhale, then gird for long haul




By Phil Carson
Story posted: November 30, 2007 - 12:00 pm EDT

Swapping out a chief executive sends a message of change. In the case of Motorola Inc.’s CEO Ed Zander’s long-anticipated departure, announced today, the message—new leadership—will require updates. Investors and market watchers clearly want to know what’s next.

Motorola’s core business in handsets continues to suffer and because product development typically is a closely guarded secret, there’s only so much a company can do to signal new products and new strategies.

The news: Zander will resign his CEO position by year’s end, to be succeeded by Greg Brown, currently the COO. Zander will remain as chairman of the board until the company’s annual shareholders meeting in May.

Prior to his appointment as COO in March, Brown led the company’s networks and enterprise business. How Brown and the company will shape the new era will be intensely scrutinized.

The news of Zander’s departure comes after an executive shuffle in September, the departure of executives tied to the rise-and-fall of the Razr handset, the loss of 7,500 jobs and a massive plunge in profit and market share.

Investors this morning gave the stock a brief boost, which quickly disappeared, perhaps in recognition that the return of value would be a long-term challenge.

According to Maynard Um, analyst at UBS, Brown’s focus will be to turn around the mobile devices business, which has accounted for the bulk of Motorola’s profits. Brown also may sell off non-core assets.

“We do not see an immediate fix for (mobile devices) and still believe it will take the better part of 2008,” Um wrote in a note to investors.

Rise and fall

Zander, hired in 2004, had presided over the rise and fall of the hit Razr handset, which may well become a case study in business schools on the vagaries of developing and managing a hit consumer electronics product. Motorola had, at the height of Zander’s management, attained more than 20% global market share, which has dwindled to less than 13%, giving Samsung Electronics Co. Ltd. the No. 2 global ranking.

As most other top handset makers engaged in continual innovation and developed broad product portfolios, Motorola had become fixated on selling as many Razrs as possible, using steep discounts to gain market share. A lunge after market leader Nokia Corp., however, could not match the Finnish company’s long-term development of its portfolio, global distribution channels and manufacturing efficiencies. Motorola’s profits eroded and the company’s platform-based, follow-up products failed to excite consumers.

Zander had prevailed over a challenge to his leadership in May as activist investor Carl Icahn sought a seat on Motorola’s board. Whether Icahn will again seek to influence the company’s direction also will be closely watched.