Billionaire investor Carl C. Icahn said he is seeking a seat on Motorola's board because he thinks the stock is cheap and the company is sitting on nearly $12 billion in cash, CNBC's David Faber reported.
"If they want to be money managers, they can go to Wall Street," Icahn said in a telephone conversation with Faber. "Why sit on $12 billion, earning 3%?"
Icahn said he wants Motorola to return cash to shareholders in the form of a stock buyback and take on more debt, Faber said
Motorola rose sharply Tuesday on news that Icahn was seeking a board seat.
Thirteen Seats on Board
There are 13 directors currently on the cell-phone maker's board, with every seat up for election each year. Motorola, which said it is reviewing Icahn's request, said no date has been set for the 2007 annual meeting of shareholders. The company held its last annual meeting in May.
Icahn and his entities own 33.5 million shares of Motorola--roughly 1.4% of the company's outstanding shares.
Icahn told Faber that he bought Motorola stock because he thought it was cheap. But he said he wasn't sure he would mount a public challenge until Motorola's chief financial officer said during the fourth-quarter conference call that the company was happy to keep its debt at its current level of about $4 billion.
Icahn believes the company should buy back as much as a third of its stock while still leaving room for acquisitions.
Icahn has taken stakes in a number of companies in recent years, pushing for changes that he said would boost the share prices or otherwise create more value for shareholders.
Icahn is mounting this effort alone, Faber said, unlike his campaign last year to boost Time Warner's stock.
The financier urged Time Warner to sell its cable assets and repurchase $20 billion in shares to "unlock" value for shareholders. CEO Richard Parsons initially rebuffed Icahn, but eventually boosted the company's buyback program.
Boost Investor Interest
Prudential Equity Group chip analyst Inder Singh said Icahn, if elected, would likely spearhead an increase in the stock buyback plan and drive investor interest in the stock.
"Carl Icahn's recent high-profile position in Time Warner (which produced substantial returns for shareholders) have led management to look deeper into ways for creating shareholder value, and we think that similar actions at Motorola could lead to increased investor interest in the company," Singh wrote in a client note Tuesday. "His strategy could involve partnerships, mergers and acquisitions, and/or a change in direction."
Icahn, who has a net worth near $10 billion, was ranked 24th on Forbes' most recent list of the wealthiest Americans.
Tuesday's announcement comes as the world's No. 2 cell phone maker cuts 3,500 jobs and takes other steps to reduce costs after misjudgments on pricing and sales forecasts for its high-end phones contributed to its least profitable quarter since 2004.