Zander Out as Motorola CEO

Despite slightly improved third-quarter earnings, Motorola Inc. CEO Ed Zander on Friday said he will step down. The move comes after months of rumors that Zander, unable to turn around Motorola’s mobile-phone business, would lose his job.

President and COO Greg Brown, 47, will replace Zander, Motorola said on Friday.

Zander, 60, will remain as CEO until Dec. 31. He will continue serving as chairman until Motorola’s annual stockholders' meeting in May 2008. He is barred from re-election or re-nomination to the board. However, Zander will stay with Motorola as a “strategic advisor to the CEO” until Jan. 5, 2009, and will be considered a non-officer employee in that capacity.

Over the next year, Zander will keep collecting his regular base salary and benefits, and his stock options and restricted stock units will continue to vest. But, he won’t be allowed to take part in any incentive bonus plans, won’t receive any equity grants in 2008 and will have to forfeit any stock that hasn’t vested by Jan. 5, 2009, according to a SEC filing. Finally, Zander will get about $5.3 million of deferred compensation.

Motorola’s announcement comes as the company has slipped to third place in terms of mobile handset market share. Nokia has taken the lead, Samsung this week nabbed second place and Apple Inc.’s iPhone – not the Motorola RAZR – is the new must-have. Zander this year also battled majority shareholder Carl Icahn to retain his position, although he told Bloomberg today in an interview that squabble didn’t influence his resignation.

Despite the year’s struggles, Zander saw a small victory in October when Motorola reported its first profit in nine months. Still, sales had fallen by 17 percent even though the company had introduced a new RAZR phone. Motorola this year has cut more than 5,000 jobs, combined business units and reshuffled its leadership in efforts to cut costs.

All of that puts a lot of pressure on Brown, who has worked for Motorola in various positions – including running the networking division and restoring the auto unit to profitability – since 2003. He was promoted to COO last March and became a director in July. Before joining Motorola, he spent much of his career at Ameritech and AT&T Inc. Zander, on the other hand, hailed from Sun Microsystems.

Samuel Scott III, Motorola’s lead director, said the board is confident that Brown “will bring a combination of strategic insight, operational discipline, and inspirational leadership needed for accelerated and sustained growth.”

Motorola’s stocks were up 15 cents during mid-morning trading on Friday, reaching $15.80.

Motorola Inc. www.motorola.com

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