Motorola head quits over board conflict

CHICAGO: Motorola Inc. said on Friday, that Chairman and Chief Executive Christopher Galvin would retire after clashing with the board over strategy, ending three generations of family control at the world's No. 2 mobile phone maker.

The company said Galvin informed the board of directors of his decision Friday morning. He agreed to remain in his position until a successor is named.

"While I have achieved substantial results, the board and I do not share the same view of the company's pace, strategy and progress at this stage of the turnaround," Galvin said in a press statement issued by the company. "Accordingly, it is time for me to pass the baton to new leadership."

Shares of Motorola rose to $11.33 on Instinet, up from their close of $11.09 on the New York Stock Exchange.

"It makes the company a bit more interesting," said Brian Modoff, wireless equipment analyst with Deutsche Bank Securities. "Now, it really depends on who they bring in."

Galvin, 53, has been chief executive since January 1997. He has been chairman since June 1999.

As Motorola grappled with a slowdown in telecommunications spending over the past few years, investors have questioned Galvin's ability to lead the company his grandfather founded. Some have accused Motorola of outright nepotism.

However, the timing of the resignation still came as a surprise to industry observers and some inside the company. Motorola said President Mike Zafirovski, who took his post last year, was currently in Europe attending customer events.

RESIGNATION INEVITABLE

Analysts and investors had repeatedly called for his resignation over the past several years, but Galvin withstood those pressures and it had been widely assumed the board would stand by him.

"I was shocked at the timing, but it was inevitable," said Jane Zweig, chief executive of wireless consulting firm the Shosteck Group. "It takes the family out of Motorola and allows Motorola to proceed with business and make tough business decisions."

Motorola, based in the Chicago suburb of Schaumburg, Illinois, has been facing an uphill battle since losing its market-leading position in the cell phone market to Finland's Nokia in the mid-1990s, due in part to management missteps. The company only recently returned to profitability after several quarters of losses.

Investors have suggested in the past that Motorola spin off its semiconductor and wireless equipment units, which both faced particularly tough competition amid a decline in demand.

While the company closed some of its chip plants, Galvin had refused to consider spinning off those units.

"People were questioning if the strategies Galvin was following were the right ones," said Ren Zamora, an analyst with Loop Capital Markets, a Chicago-based investment bank.

"His plans were all long-term," Zamora said. "People were almost at the point of being fed up ... There has been a lot of promising, but no financial performance."

Shares in Motorola have lost about 46 percent during Galvin's tenure as CEO. By comparison, the Dow Industrials index has gained about 50 percent over that period.

NO OBVIOUS SUCCESSOR

Analysts were unsure of who Galvin's successor might be. Galvin has two sons but they are in high school and college. Motorola also has no vice chairman.

While Zafirovski, Motorola's president, would be a natural candidate, analysts pointed to his lack of experience in managing a large corporation.

"(Zafirovski) is still proving his abilities in his current role. To be CEO of the company is a jump," said Zweig.

Former Motorola President Edward Breen was previously seen as Galvin's likely successor, but Zweig said she believed Motorola's board was still angry over his abrupt resignation to take over Tyco International Ltd. last year.