Technology Word

Motorola Inc. on Monday dismissed as an “unnecessary distraction” billionaire investor Carl Icahn’s legal efforts to force it to turn over documents about its executives and its cell phone business.
Icahn plans to use the material in his battle to win four seats on the Schaumburg-based company’s board. Motorola prevailed in a similar proxy battle with Icahn a year ago.
“Over the past 12 months the statements and predictions of Motorola’s management and the board about mobile devices business have too often proven to be wrong,” Icahn said in a statement.
Icahn sued the company for the documents Monday afternoon in the Court of Chancery of the State of Delaware.
“We demanded these materials for the purposes of enabling us to investigate whether and to what extent the board of directors of Motorola failed in their duties as directors in supervising management and setting policy and direction of Motorola,” he said.
Motorola said it rejected Icahn’s “demand for extensive access to its books and records” earlier this month on the belief that he does not have a credible basis to request such an inspection.
“Motorola had offered Mr. Icahn access to information concerning Motorola pursuant to a customary confidentiality agreement, but Mr. Icahn chose not to avail himself of that opportunity and instead seeks to create further unnecessary distraction,” the company said in a statement.
The investor has nominated former Viacom Inc. CEO Frank Biondi, WR Hambrecht & Co. founder and CEO William Hambrecht, Massachusetts Institute of Technology professor and semiconductor materials processing expert Lionel Kimerling and Icahn Enterprises CEO Keith Meister for Motorola’s board.
Icahn said in a story posted late Monday on The Wall Street Journal’s Web site that Motorola offered to seat two of his nominees on the board, but excluded Meister from the proposal.
Icahn called Motorola’s rejection of Meister “intolerable and reprehensible” and said he turned down the offer, the Journal reported.
Icahn did not immediately return a call from The Associated Press.
Motorola spokeswoman Jennifer Erickson said the company was not commenting on its discussions with Icahn.
In his lawsuit, among other materials, Icahn is seeking board documents related to a potential spin-off of the cell phone unit, the service and selection of Motorola’s senior officers and materials related to the use of company aircraft by senior management, board members and their families.
Icahn, who has been steadily increasing his Motorola position, disclosed in a filing this month that he now owns 142,362,000 million shares, or 6.3 percent - up from 5 percent a month ago.
Icahn said in a letter to Motorola stockholders that the company “assured us during last year’s proxy contest that they had a plan to right the ship.”
Instead, he said, the results in the cell-phone division “are a stockholders’ nightmare.” He favors spinning off the division to stockholders as a wholly separate company with a new CEO. The company has indicated it is considering selling or spinning off the unit.
In January, Motorola told investors its net profit had fallen 84 percent in the final quarter of the year and mobile phone sales were down 38 percent. The company revealed its already diminished market share continued to fall as Nokia and other competitors carved into its sales.
Former Motorola Inc. Chief Executive Ed Zander stepped down at the end of last year under pressure from investors after a disastrous stretch that pushed Motorola into third place in the global cell-phone market and caused it to lose $49 million for the year.
Zander was succeeded Jan. 1 by Greg Brown, who the company announced in February has assumed day-to-day responsibilities of the phone business.
Motorola shares rose 45 cents, or 4.8 percent, to close at $9.69.
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(Updated with comments from Icahn, similar court cases, background starting in ninth paragraph.)

By Roger Cheng

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- In his latest gambit to gain influence at struggling Motorola Inc. (MOT), activist investor Carl Icahn on Monday sued the company in hopes of forcing it to release documents related to its mobile devices unit.

Icahn is again waging a proxy fight with the Schaumburg, Ill., company, and has put up four candidates to replace directors on Motorola’s board. He attempted - and failed - to do so a year ago when cracks began forming in the company’s once mighty handset business. With shares down more than 50% in just the last six months, Icahn is pressing his case.

Motorola shares recently traded at $9.64, up 4.3%, as they rebound from their 52-week low of $8.98 set Thursday.

The lawsuit, filed in Delaware, follows what Icahn said were failed attempts to get the materials he sought. He contended those items would help him ” ascertain what the board could have done” to assure shareholders that the company’s comments weren’t incorrect and wouldn’t give shareholders “an inaccurate perspective on the prospects for the mobile devices business.”

Motorola, however, refused the request and called the move a distraction.

“Motorola rejected Mr. Icahn’s demand for extensive access to its books and records, as the company’s does not believe that Mr. Icahn’s demand sets out a proper purpose to support a right of inspection under Delaware Law.,” spokeswoman Jennifer Erickson said in an e-mailed statement.

Motorola had offered Icahn access to information in exchange for a typical confidentiality agreement, but he didn’t take the company up on the offer, Erickson said.

Icahn “instead seeks to create further unnecessary distraction,” Erickson said.

Similar cases, in which investors have sought inside corporate information, don’t bode well for Icahn. One such case had Polygon Global Opportunities Master Fund suing West Corp. (WSTC) to inspect its books. The Delaware court denied the request. In a number of cases, the courts have denied the requests because of a lack of a specific objective.

Icahn on Feb. 1 named four board nominees who will try to push the troubled company to quickly spin off or sell its flagship handset division. That announcement came a day after Motorola said it was considering spinning off or selling the segment.

Icahn has long argued that Motorola’s stock is severely undervalued and that splitting off the cellphone division would improve shareholder returns. He believes it would unlock $20 billion in value. The unit accounted for just more than half of the company’s 2007 sales of $36.62 billion but has experienced plummeting sales in recent months as Motorola failed to come up with a replacement for its popular Razr phone.

Icahn, meanwhile, said on CNBC Monday that he believes the stock is “very undervalued” and there was a good chance he would buy more.

“The value of (Motorola) stock gives no value to the handset business,” he said. “It’s losing a lot of money, but it’s losing a lot of money because there is no management. We think there is value there. You have a great brand name ( and) a great deal of money spent in research.”

Icahn wrote in a letter to shareholders asking for support for his board slate that “2008 was supposed to be a successful and profitable year in Mobile Devices with the potential to achieve 10% operating margins in the near future” He added: “Instead, the results are a stockholders’ nightmare.”

The latest chapter in Icahn’s battle to change Motorola comes as the company sees a stream of managerial departures amid problems in its handset division. Since Greg Brown took over as chief executive in January, the company has replaced its head of finance, human resources and technology, among other senior executives.

Two weeks ago, Icahn said he was supporting a shareholder “say-on-pay” proposal and another proposal designed to prod the company to recoup any ” unearned” bonuses received by executives. Motorola has said it opposes the shareholder proposals, which previously were disclosed by the company.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(Mike Barris and Rebecca Townsend contributed to this report.)

(END) Dow Jones Newswires 03-24-08 1534ET Copyright (c) 2008 Dow Jones & Company, Inc.
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