Motorola on Friday announced that CEO Ed Zander will step down at year’s end to be replaced by Chief Operating Officer Greg Brown, ending a tumultuous, four-year run atop what’s now the world’s third-largest handset manufacturer.
Zander, who will continue in his role as chairman of the board of directors until the company’s annual shareholder meeting in May, told the Associated Press that it had been his decision to resign, saying “this is what I wanted to do.”
But analysts and some shareholders, particularly activist investor Carl Icahn, had been calling for his resignation for months as the company’s financial performance and stock price continued to deteriorate.
In October, Motorola posted a modest third-quarter profit of $60 million, or 3 cents a share, on sales of $8.81 billion — down from a profit of $968 million, or 39 cents a share, on sales of $10.6 billion during the same quarter last year. Worse, the company’s mobile phone sales plunged 36 percent to $4.5 billion and the unit incurred an operating loss of $138 million.
Meanwhile, Motorola’s stock had maintained a steady and precipitous decline, losing 30 percent of its value during the past year.
Shortly after Zander’s appointment as chairman and chief executive, Motorola rolled out its all-metal RAZR phones to wide praise and rabid consumer demand. In less than four years, Motorola has sold more than 110 million RAZR phones, by far the most of any of the company’s products, but the RAZR’s popularity has waned in recent years.
Now Motorola finds itself a distant third to industry leader Nokia and No. 2 Samsung Electronics in the handset market, while Apple’s iPhone is basking in the buzz its RAZR offering once enjoyed.
For the time being, the company is providing few details about any changes in strategy.
“This is a unique company with strong technology, people and customers,” Brown said in a statement. “I welcome this opportunity to lead Motorola successfully into the future. We have a lot to do and I am intensely focused on building shareholder value.”
Even before Friday’s official announcement, indications had been mounting that Zander’s days were numbered. While Zander managed to fend off a proxy fight from Icahn for a seat on Motorola’s board earlier this year, the stock’s flagging performancecombined with a sea of red ink had analysts and other shareholders bracing for the inevitable.
Another sign came in July, when Motorola named Brown, as COO, to its board of directors. Typically, the CEO and occasionally the chief financial officer are the only executives appointed to the board. It’s even rarer that a chief operating officer is elevated to such a position of prominence.
“I think it’s a move that’s long overdue,” Ken Dulaney, an analyst at Gartner, said in an interview with InternetNews.com. “Ed Zander presided over a mistake that Motorola has made before — ignoring trends in the industry. They rode the RAZR too long.”
Dulaney said Brown and the rest of the Motorola executive team face some tough decisions ahead, particularly in deciding which software platform or platforms it will use for its next-generation mobile phones. He added that consolidating its software platform down to just Microsoft and Google would allow Motorola to target both the business and consumer markets.
“If you look at the handset business, fashion often determines success or failure,” Dulaney said. “Running this business today is more like Liz Claiborne than Sun Microsystems. Apple showed us that innovation and fashion comes from software. What does the device do? That’s something Motorola needs to figure out.”
Motorola shares rose 1 percent to $15.86 in Friday afternoon trading. On Tuesday, the stock hit its 52-week low of $14.87; a year earlier, shares of Motorola had traded at $22.55 per share.
