Investor Icahn Drops Proxy Fight Against Motorola

Deciding that discretion is the better part of valor, Motorola and billionaire financier Carl Icahn agreed to stop fighting each other.

In an announcement Monday, Motorola agreed to seat two of Icahn's nominees to its board and Icahn agreed to drop his proxy fight against Motorola.

The two factions were separately reaching common ground anyway as Motorola last month decided to break its company in two and the firm offered Icahn some representation on the board. Icahn, who says he represents 6.4% of Motorola stock, had argued for months that the firm was worth more in pieces than it was as a seller of cell phone handsets and wireless technologies.

Icahn had intensified pressure against Motorola last week when he announced he was seeking Motorola documents in Delaware Chancery Court including records of executive use of Motorola corporate aircraft. Another key stumbling block was hurdled Monday when Motorola agreed to accept Keith Meister, Icahn's right-hand representative, on its board. William Hambrecht, founder of WR Hambrecht + Co. will also join the Motorola board as an Icahn representative.

In a statement, Motorola's chief executive Greg Brown When Motorola announced it planned to split Motorola into two separate companies, it was clear that Motorola management was moving closer to concurring with Icahn's campaign to divide the company. When the decision to split the company was announced, Brown said Icahn's actions weren't considered in the action.

In its move to divide the company, Motorola said it plans to create two communications companies in a tax-free transaction in 2009: Mobile Devices, its handset operation, and Broadband & Mobility Solutions, a catch-all entity containing its government and public safety units, telecom gear, and cable set-top receivers.

Motorola said it will seek "input" from Icahn on issues regarding the Mobile Devices spin off and on Motorola's search for a new CEO for the Mobile Devices unit. Mobile Devices has been rapidly losing handset market share to other mobile phone providers including Nokia, Samsung, and LG Electronics.

The Mobile Devices unit delivers multimode, multiband communications products and technologies, and designs, makes and sells mobile handsets and accessories. The Broadband & Mobility Solutions unit designs, integrates and manufactures voice and data communications systems and wireless broadband networks for enterprises, government, and public safety users.

Last year, Icahn lost a proxy battle over the election of Motorola directors. After that, the company sagged under the leadership of former CEO Ed Zander, who gave up the helm of the company to Brown this year.