"The vote outcome is likely to negatively impact the shares in the near term as some investors expected Mr. Icahn to push for more aggressive near-term steps," said CIBC analyst Ittai Kidron in a a note to clients.
Motorola said that based on a preliminary estimate of the votes cast by shareholders in an annual meeting in Chicago, Icahn was not elected, while current board members were reelected. The company said final results will be available within three weeks.
"We remain steadfast in our commitment to continue building value for all of our stockholders," Chief Executive Ed Zander said in a statement announcing the results after the meeting.
To that end, he said at the meeting that Motorola will unveil next Tuesday new mobile devices based on 3G mobile and Java technologies. Motorola, the No. 2 maker of mobile phones behind Finland's Nokia, had blamed a lack of 3G devices for its recent weak sales.
Icahn, 71, has taken roughly a 3% stake in Motorola since he revealed plans in late January to seek a board seat. After Monday's meeting, during which he said his bid had likely failed, Icahn said he had no plans to sell his shares.
"It's a very, very good investment," he told reporters outside the Art Institute of Chicago. "It's just a question of do they have good enough management to carry it home.
"The next three, four months are going to tell the story and I really hope Ed (Zander) is correct in what he's saying and that things will go well," he added.
Motorola's management has come under increasing criticism in recent quarters as the Schaumburg, Ill.-based company struggled with weak cell phone sales that caused it to post a first-quarter loss.
Icahn initially had said he wanted Motorola to conduct a large share buyback, but after a bleaker-than-expected 2007 outlook he changed his position, saying fixing the company's operational problems took precedence.
Motorola had urged shareholders not to vote for Icahn, saying the activist investor was already on too many boards and lacked experience in the wireless industry.
"The argument against me I took some umbrage to," Icahn said during his comments at the meeting. But he added no matter the outcome, he had won because "this company has gotten the message."
Icahn blamed his loss on three or four large mutual funds he did not identify that threw their support behind Zander and the board. He said he had won the support of many small mutual funds and hedge funds, as well as individual shareholders.
In a shareholders meeting that was surprisingly cordial following a bitter proxy battle, Icahn even went as far as to congratulate Zander for the expected victory.
That was in sharp contrast to Icahn's earlier criticisms, such as when he said Motorola had "suffered a critical failure in oversight and leadership" and likened reported comments by Zander to "something straight out of Alice in Wonderland."
Icahn started his speech on Monday by saying, "I feel like Marc Antony coming to the funeral of Caesar here." He then said he was paraphrasing Shakespeare. "Ed Zander is a qualified man, so are they all qualified men."
Nevertheless, he said the board had failed to hold company management accountable for its mistakes, and he was puzzled by the company's efforts to keep him off the board.
"There's no reason they shouldn't have welcomed me with open arms. I mean, heck, I'm a nice guy," he told laughing investors, whom he assured his attacks of Zander were not personal but based on the company's missteps.
For his part, Zander made a point of starting the meeting by recognizing Icahn and officials allowed him to answer shareholder questions.
After touting progress by the company in 2006, Zander acknowledged Motorola
needs to do better. "In 2004, 2005 and most of 2006, this was the vision that knocked the cover off the ball," he said. "We have to get it back on track. Our management team is
committed. I do believe we have the right strategy."
One small firm said Icahn, for whom it voted, only lost the latest battle.
"Icahn trumpeted quite loudly that the second-half story Ed Zander has been talking about had better prevail or he'll be back with a vengeance, and the next time the board won't have the support of those (large) holders," said Tom McIntyre, president of an asset management firm in Orleans, Massachusetts, with around $110 million in assets. "You flipped the page, but I don't think the story is over."
Motorola's stock has lost about one-third of its market value since October.