Motorola (NYSE:MOT)'s second largest shareholder, Carl Icahn, on Monday said he's suing the communications company in order to obtain records detailing the vendor's strategy for its struggling mobile device business and documents pertaining to the use of a corporate jet by top Motorola executives and their families.In a statement, Icahn said he's filing a lawsuit in the Court of Chancery of the State of Delaware ordering Motorola to allow him to inspect the requested materials.
"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," the billionaire activist and financier wrote in a statement. "We want to ascertain what the board could have done in the exercise of its fiduciary duty to assure Motorola stockholders that Motorola's statements and predictions were not incorrect and would not provide Motorola stockholders with an inaccurate perspective on the prospects for the mobile devices business."
Icahn said he demanded materials to determine whether Motorola's board failed in setting the vendor in the right direction, but said Motorola would not comply with his demand. Motorola could not be immediately reached for comment.
Icahn is seeking materials including board and committee minutes relating to the service and selection of Motorola's senior officers; the prospects or strategy of Motorola's mobile devices business; and the realignment of its business regarding mobile devices, including the potential spinoff of the mobile devices business.
Icahn also seeks to look at any documents provided to Motorola's board regarding matters disclosed in certain press releases and conference calls concerning Motorola's performance, particularly those that mentioned improvements or changes in the mobile devices business that have not come to fruition.
Lastly, Icahn is looking for documentation showing the use of Motorola's corporate aircraft and other property by members of senior management, the board of directors and their families, including the aircraft's use for personal reasons. The request also includes all records regarding reimbursements to Motorola.
"We demanded these materials for the purposes of enabling us to investigate whether and to what extent the board of directors for Motorola failed in their duties as directors in supervising management and setting policy and direction for Motorola," Icahn said.
Icahn also urged stockholders to vote for new directors of Motorola at the 2008 annual stockholders meeting, scheduled for May 5.
In addition to his statement, the New York-based Icahn issued a letter to shareholders, highlighting Motorola's struggles.
"As we all are painfully aware, over the past 18 months, the market value of Motorola has dropped by over $37 billion," he wrote. "More than $17 per share of stockholder capital has vanished under the 'guidance' and 'leadership' of the current board."
In the letter, Icahn details a situation that has "gone from bad to worse," noting that this year was supposed to be a successful and profitable year in mobile devices with the potential to achieve 10 percent operating margins in the near future. Instead, Icahn said, it has become a "stockholders' nightmare."
This isn't the first time Icahn has squared off against Motorola. Last year, Icahn argued that Schaumburg, Ill.-based Motorola needed true stockholder representation on the board of directors, a battle he lost in a close election during last year's proxy contest.
"Motorola's board and management made enough empty promises to convince stockholders to give them another change to get it right," he wrote. "They didn't. What we got instead was a year of revolving-door executives, a leadership vacuum, and accelerating deterioration of Motorola's Mobile Devices unit."
He plans to use the materials he obtains through the lawsuit as part of his ongoing battle to win four seats on Motorola's board. Icahn has nominated former Viacom CEO Frank Bondi, WR Hambrecht & Co. founder and CEO William Hambrecht, MIT professor and semiconductor materials processing expert Lionel Kimberling and Icahn Enterprises CEO Keith Meister for spots on the board.
Icahn now owns 6.3 percent of Motorola shares. In the final quarter of the year, Motorola told investors that net profit dropped 84 percent and sales of mobile phones fell 38 percent, while rivals Nokia and Samsung continued growth.
Along with dipping profits, Motorola faced other challenges in 2007, including CEO Ed Zander stepping down.
Recently, Motorola has said it is considering selling or spinning off its cell phone division, which is now headed by Greg Brown, Zander's successor. Icahn has said he supports spinning off the devices division.
source: http://www.crn.com/
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