Tuesday, May 08, 2007

Motorola (NYSE:MOT): No board seat for Carl Icahn

- CIBC comments on Motorola (NYSE:MOT) after news reports and comments from Mr. Icahn and Motorola suggest he fell short of his goal to win a board seat.

While the close vote suggests a large number of investor are unhappy with the current state of the company and pace of restructuring, it gives CEO Ed Zander room to work. But time will be short and Mr. Zander will now clearly be under the board's gun to show improvement.

The vote outcome is likely to negatively impact the shares in the near term as some investors expected Mr. Icahn to push for more aggressive near-term steps. The firm also looks for the company to be less aggressive on buyback activity in the near term, which could reduce support for the shares.

Firm's estimates and SP rating are unchanged. Regardless of the make up of Motorola's board, management has a significant amount of work to do. They would wait for more evidence of a turnaround that may not come until late in 2007 before revisiting our rating. Maintains neutral opinion.

Notablecalls: I'm hard pressed to see any real downside in MOT stock following the news. Icahn blamed his loss on three or four large mutual funds he did not identify that threw their support behind Ed Zander and the board. Zander better show some results in H207 or he will lose the backing of these large holders.

Reuters reports: Icahn, 71, has taken roughly a 3 percent stake in Motorola since he revealed plans in late January to seek a board seat. After Monday's meeting, during which he said his bid had likely failed, Icahn said he had no plans to sell his shares.
"It's a very, very good investment," he told reporters outside the Art Institute of Chicago. "It's just a question of do they have good enough management to carry it home.
"The next three, four months are going to tell the story and I really hope Ed (Zander) is correct in what he's saying and that things will go well," he added.

Icahn initially had said he wanted Motorola to conduct a large share buyback, but after a bleaker-than-expected 2007 outlook he changed his position, saying fixing the company's
operational problems took precedence.

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