Instead of only presenting the problems, our investor group wants to be part of the solution which will deliver extraordinary value to Motorola shareholders and make it a better company for its employees and customers. 

We have drafted a "Plan B" (see below) to put Motorola on a path back to its rightful place as the worldwide leader in communications.

As a Motorola shareholder, I’m calling on other institutional and individual shareholders to join me in standing up and being part of a “Plan B” solution for positive and much-needed change at the 79 year old American institution.

(The following points are presented in draft form. Supporters are welcome to provide their comments/edits in the forum at the bottom of the pledge. Once we receive final comments and suggestions over the coming weeks, we will finalize the plan and submit it to the Motorola board for action.)

Proposed Motorola Plan B (make your comments in ourforum at the bottom of the Pledge)

1. Replace Ed Zander as Chairman and CEO immediately.

This January will mark the 4 year anniversary of Mr. Zander’s hiring. Nokia and the S&P 500 have exceeded Motorola’s shareholder returns by 3 times over that time period. Many suspect that Motorola will drop from the #2 to the #3 position in worldwide handset sales this year . The results from the past three quarters have been under-whelming, as the company sank to negative margins. The Q2 numbers are expected to also be weak.

There is no obvious answer to the question: What has been Ed Zander’s mark on Motorola? He came with a Silicon Valley background, but how has that experience or those past ties translated into tangible results for the Schaumburg, IL-based Motorola? What has he brought to Motorola that is really unique in the last 3½ years? If it’s difficult to answer that question, we find it hard to imagine what he’ll bring moving forward, which is why we suggest a change is needed now.

You can agree or disagree with Terry Semel’s vision for Yahoo!, but he had a vision. There is no discernible vision or articulated strategy for Motorola by Mr. Zander. At the May 31st, 2007, Lehman Brothers Worldwide Wireless & Wireline Conference , Mr. Zander stated: “We have a strategy: Seamless Mobility.” This concept is repeated often on the corporate website and in recent letters to shareholders. What does it mean? How does it suggest Motorola will better compete with its rivals in its Mobile, Networks, and Connected Home divisions? If shareholders cannot figure this out, can Motorola’s employees? A concept is not a strategy.

Mr. Zander arrived at Motorola in January 2004 and was blessed with the good fortune of the success of RAZR. Only when troubles became obvious to all at the end of RAZR’s run did he begin to rationalize costs and accelerate plans for a next-generation of phones. Now, the focus is on turnaround.

We are also deeply concerned with the reports which surfaced in an April Wall Street Journal article that Mr. Zander allegedly said: “I love my job. I hate my customers” in response to a question about why Motorola’s carrier customers were discounting the prices of Motorola’s phones. He later apparently suggested that, one day, he was going to use that line as the title for his memoirs. Motorola tried to defuse this story leading up to the May 7th annual meeting, by stating the company and Mr. Zander care about their customers. Everyone makes mistakes, but, in our opinion, this episode suggests arrogance or at least poor judgment that (1) Mr. Zander would actually say this and (2) he would be contemplating possible titles for his memoirs. According to research done by Dartmouth Tuck Professor Sydney Finkelstein (who is also a colleague), corporate and CEO arrogance is a critical reason “why smart executives fail” . We believe that, although not the sole reason, this poor judgment or arrogance, combined with failing to articulate a strategy, failing to prepare the organization for the end of the RAZR wave, and – most importantly – the under-performance of the stock compared to its rivals are the main reasons why Motorola shareholders would benefit from new leadership at the top.

2. Replace Judy Lewent, Nicolas Negroponte, Samuel Scott III, and Dr. John White on the Motorola Board of Directors.

If you had a sense of déjà vu watching what happened with RAZR, it’s because Motorola has lived the story before of riding the wave of a hot product without sufficient heed to where the industry is moving to. Ten years ago, it was with StarTAC: the “iconic” hit phone, which was analog-based. All the signs pointed to the industry moving to digital. However, Motorola’s plans for digital phones were delayed, so that additional resources could “feed the beast” of StarTAC. The company almost drove off the precipice as a result. Fortunately, for its customers, employees, and shareholders, it pulled itself back from the brink. You would hope that an organization would institutionalize the learnings of such a heralding experience. Yet, the parallels between RAZR and StarTAC are eerie. Why didn’t Motorola learn?

Chris Galvin, the former CEO and grandson of Motorola’s founder, is no longer around. However, 4 of Motorola’s current board of 11 were around. Judy Lewent, the CFO for Merck, has served on the board since 1995. Nicolas Negroponte, a director of the MIT media lab, has been on the board since 1996. Dr. John White, the Chancellor of the University of Arkansas, has been on the board since 1995. And Samuel Scott III, the head of a corn refining business, has been on the board for almost 15 years.

In the wake of Sarbanes-Oxley, a lot of attention has rightly been paid to the issue of board “independence.” It is a good thing to have directors who are sufficiently vigilant and will ask hard questions of management. Yet, how “independent” can you be when you’ve served on a board for over a decade? Meg Whitman, CEO of eBay, famously said that no CEO should stay in the same job for 10 years or they risk becoming stale in the saddle. We agree and think this same benchmark should apply to all corporate directors for the sake of fresh eyes and energetic vigilance.

One argument a defender of keeping a director on the same board for over a decade could make is that: it is critical for retaining some “institutional memory” in board discussions. Presumably, these longer-serving directors could remind their shorter-tenured brethren about organizational mistakes made in the past that shouldn’t be repeated – such as StarTAC. We thank Ms. Lewent, Mr. Negroponte, Dr. White, and Mr. Scott for their service, but respectfully and strongly suggest that the company would be better served by new independent directors with strong business and communications experience.

3. Appoint Edward Lampert to the Motorola Board and others with deep communications experience.

As mentioned above, the Motorola board has – in the past – chosen to appoint directors with an abundance of experience outside Motorola’s core communications industry. While we don’t advocate a board only consisting of industry veterans, we believe a solid majority should be experienced within the markets in which Motorola directly competes, rather than – for example – from the pharmaceutical, consumer packaged goods, agricultural, and academic worlds. Therefore, we suggest replacements for the 4 people named above reflect this. New Motorola director David Dorman who is ex-AT&T fits the bill for what we’re asking.

Strong business experience and a track record of success are also important criteria for a director. So is the psychological importance of owning stock in the company (which a director has directly purchased, as opposed to stock ownership through stock grants or stock options received as partial compensation for board service). We note that 10 out of 11 of the current Motorola directors own less than 50,000 shares, with 4 directors owning less than 5,000 shares (and we suspect that most of these holdings came through stock grants or through stock options received, rather than digging into their own pockets to purchase stock). In our opinion, that is simply not enough “skin in the game” for a corporate director of a major global company.

One candidate that we believe fits the bill for a strong track record of business experience, as well as Motorola stock ownership, is Edward Lampert of ESL Investments Inc. Mr. Lampert disclosed he is now a holder of Motorola stock following the May annual meeting . We suggest that Motorola make a spot available for him immediately at the board of directors’ table.

4. Outline the long-term vision and strategy for Motorola.

In the May Lehman Brothers speech, Mr. Zander said a company’s strategy shouldn’t change year to year, but its tactics should. We couldn’t agree more. However, the stated strategy is simply “Seamless Mobility.” A recent analyst who has analyzed the clarity of Mr. Zander’s letters to shareholders for the last few years, according to the Wall Street Journal, called them “Bafflegab.” A notable quotation from the 2005 Motorola annual report letter cited is: “Motorola's going to own Seamless Mobility, where today's hottest technology is converging -- where the Mobile Me lives -- where mobile broadband means everything everywhere and anything anywhere." A new clichéd term Mr. Zander is fond of using is “profit pools” (as in “we’ve got to find the profit pools”). Three and a half years into his tenure, the company and its shareholders desperately need to better understand the strategy for turning things around.

The recent attack which Motorola’s board directed at Mr. Icahn leading up to the annual meeting was – in our opinion – a smoke-screen. By asking shareholders to focus on the number of directorships currently held by Mr. Icahn, Motorola’s leadership avoided having to better explain its strategy for the company.

A long-term vision and strategy is not cost containments and site rationalizations alone. Controlling costs is obviously critical when your major division is seeing sales recede as much as they have in the last 3 quarters. Yet, no company shrank itself to greatness. The simple truth is that customers do not like the current line-up of phones and there needs to be a better strategy for more compelling phones that will raise revenue. Getting 18 new models out to market this year to lukewarm response doesn’t fix that problem. The RAZR2 is 10x as fast as the RAZR and has an armload of new features, but potential customers don’t seem to care. In our opinion, none of the models is a game-changing device that will sweep up the consumer or business space. They are incrementalist improvements on past styles. Recent excitement over competitors’ new product launches make the differences all the more stark. So, what must the new strategy speak to? Next-generation designs.

When you first saw the Chrysler S300, you likely turned your head; and you have designer Ralph Gilles to thank for it. The RAZR made this impact, and Geoffrey Frost (former Motorola Marketing head) played a key role in this. Yet, RAZR2, KRZR, ROKR, RIZR, and the Q9 appear to be so yesterday. Management is fond of talking about getting to Linux/Java platforms to make richer software experiences, and better competing with Nokia and others in certain tiers of the market in which Motorola doesn’t play. They need to outline the strategy for getting better product design out of the labs and into the market.

Corporate strategy also has to be more than just MDB strategy. Motorola investors want to know what they can expect from the Networks and Connected Home businesses as part of their MOT investment in years to come. What was the rationale for keeping them and jettisoning the Semiconductor business a few years ago? The process by which Motorola followed for getting out of the semiconductor business demonstrates poor long-term planning. The decision to spin-off the Semiconductor business was announced in October 2003 . The IPO came in July 2004, delivering $1.5 billion to Motorola shareholders . The decision was defended as a way for the company to “focus” on its core businesses and increase shareholder value through the spin-out. Yet, Motorola continued to work with Freescale (the name of the spun-out entity), as if it was a business it owned within the Motorola family, sole-sourcing chips for many of its phones. Part of the recent downturn in MDB is due to the fact that Motorola has been producing phones at a cost disadvantage, because it hasn’t sourced silicon from other vendors two years after the Freescale IPO. This risk should have been identified and baked into the corporate strategy by head office well in advance.

5. Appoint a Permanent Head of the Mobile Devices Business.

Mobile represents more than half of Motorola’s revenues. The two smaller divisions have heads. Former head of the Mobile division, Ron Garriques, left in February to join Dell and, almost 6 months later, no successor has been named. There are currently two interim co-heads: Ray Roman and Terry Vega. At the moment, they are being supported by (according to the April analysts’ call) Ed Zander, Tom Meredith (the CFO), and Greg Brown (the COO). The Mobile Group needs one permanent head to drive leadership and turnaround through the group most effectively – not 5 heads.

We need all Motorola shareholders – large and small, institutional and individual – to join us, if they are also dissatisfied with Motorola’s performance for the last 3.5 years and want to see better performance from their investments. They can be part of our constructive solution. There is not a quick, financial fix for Motorola. In our view, investors need to take the long-view and dig in for some difficult work ahead. The changes must start now though. Our group is made up of long-term investors in the company who are committed to seeing it return to its rightful place of industry leadership. A stronger Motorola is good for its shareholders, customers, and employees.

The time is now. We need you to “pledge” your shares towards our “Plan B” group. By doing so, you will give us the strongest possible voice with which to negotiate with the Motorola board for these changes outlined above.

To offer your comments/suggestions/additions to the Motorola “Plan B” before we formally submit it to the board, go to our forum at: http://www.youchoose.net/?q=node/50240.

To “pledge” your Motorola shares to our group – expressing your desire for us to count your shares informally in our group that we represent to Motorola as wanting to see “Plan B” enacted, go to our YouChoose.net “pledge” site at: http://www.youchoose.net/pledge/motorolaplanb .

Thanks for being part of the solution for Motorola shareholders, employees, and customers. This is a great company that can be and will be again.