Motorola CEO Zander replaced by COO Brown

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CHICAGO -- Motorola Inc. said Friday that Ed Zander will step down as chief executive on Jan. 1 after months under pressure for the sharp decline of the company's cell-phone business in the wake of an unsustainable hot streak led by its trend-setting Razr.

Zander, 60, will be replaced by President and Chief Operating Officer Greg Brown, 47, as CEO.

The announcement sent Motorola shares up modestly.

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 in an interview with The Associated Press.

"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 planned 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.

A two-year run of success Motorola enjoyed following 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 cell phone market behind Samsung Electronics Corp. and remains far behind leader Nokia Corp.

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. Prior to joining Motorola, Brown was chairman and CEO of Micromuse Inc., 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.

Motorola shares rose 15 cents to $15.80 in morning trading. The stock remains down more than 20% in 2007 and is about 40% off its six-year high of $26.30 reached just a little more than a year ago.
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