Motorola CEO Ed Zander will step down

Motorola mot said Friday that Ed Zander will step down as chief executive of the troubled cellphone maker Jan. 1.

Zander will be replaced by President and Chief Operating Officer Greg Brown, 47.

The departure announcement was not unexpected and Motorola shares moved only slightly, reflecting continuing caution on Wall Street toward the company.

Zander, who will stay on as chairman until the company's annual shareholders meeting in May 2008, maintained that the decision to go was his alone despite the severe criticism he received for the company's struggles over the past year and calls from some shareholders to replace him.

"This is what I wanted to do," he said.

"You'd like to leave when you're at the top of your game. ... You don't like to leave when you have a year like this with mobile devices," Zander said. "But I think we have enough structurally done with this company that when mobile devices does get back to its execution, we're a stronger company than we were four years ago."

He said he plans to "go do the things that my wife and I have wanted to do now for years and years."

Banc of America Securities analyst Tim Long called the transition a "slight positive" for Motorola.

"We view the change positively as we believe a fresh strategy may help restore growth and aid a quicker bounceback in operating margins," he said in a note to investors.

But the departure also left some wary about what it might signal about Motorola's nascent turnaround effort.

"While Mr. Zander's departure has been the source of speculation for some time, we had thought that an improvement in mobile devices could possibly grant him a stay," said Citigroup's Jim Suva in a research note. "We now wonder if today's announcement signals yet another disappointment for the handset segment and more meaningful changes that have to occur."

A two-year run of success Motorola enjoyed after the launch of its Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

Motorola has since slipped to third place in the cellphone market behind Samsung Electronics and remains far behind leader Nokia nok.

Last month, Motorola reported a 94% drop in third-quarter profit but still managed to impress Wall Street with its progress, improving from a dismal first-half performance and showing that its turnaround effort may be taking hold.

The cell-phone unit, Motorola's biggest, saw quarterly sales plunge 36% to $4.5 billion and recorded an operating loss of $138 million. That was nearly $1 billion worse than a year ago but only about half the $264 million loss of the second quarter.

Brown joined the company in 2003 and has served as president and COO since March. Before joining Motorola, Brown was chairman and CEO of Micromuse, a network management software company.

Asked whether he envisions a departure from Motorola's recent strategy, Brown said he would provide an update in early 2008 on the next steps.

"We've made a number of changes already," he said in an interview. "We're focused on finishing the year and ensuring a smooth transition."

Zander will continue to serve as an adviser to the CEO through Jan. 5, 2009, and until then will continue to receive his regular base salary and benefits. Zander's stock options and restricted stock units also will continue to vest and be exercisable during that time.

Motorola said in a filing with the Securities and Exchange Commission that Zander won't be eligible to participate in its 2008 incentive bonus plans, won't receive any new equity grants in 2008 and will forfeit any stock options and restricted stock units that haven't vested as of Jan. 5, 2009.

A total of about $5.3 million of previously earned but deferred compensation will be paid out, representing the current value of Zander's 2004 annual bonus which had been deferred.