Why Carl Icahn May Hurt Motorola

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While Motorola’s CEO Edward J. Zander looks for a solution to reverse declining cell-phone sales, Carl C. Icahn, who holds a 2.7% stake, clamors for stock buybacks. According to Businessweek, Icahn wants Motorola to not only use its entire $9 billion cash stash, but also to mortgage future cash flows by taking on debt to fund even more buybacks of up to $15 billion in stock; this money would normally go to R&D. Nick P. Nilarp of Fitch Ratings Inc. claims that “Motorola has to manage operations, innovate, and invest in research and development” if it wants to be successful, not on buybacks. Companies such as Apple and Research in Motion Ltd, who are introducing competing products, are pouncing on Motorola’s vulnerability when the company forecast a $1.2 billion revenue shortfall. Motorola has already spent $2 billion on buybacks and has committed an additional $3 billion to future repurchase, but its share price has fallen.
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For Detailed Investor Profiles on these Investors, click below:
Icahn Associates (Carl Icahn)
Related People: Alexander J. Denner; Brett Icahn; Carl Icahn; Keith A. Meister*
Related Entities: High River Limited Partnership; Icahn Partners; Icahn & Co Inc; Icahn Associates; Icahn Enterprises (formerly American Real Estate Partners); Icahn Fund Ltd; Icahn Partners LP
Related Article Tags: Shareholder Activists, Corporate Raiders and Proxy Battles

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