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June 3, 2008

Motorola is in late-stage talks with a few potential candidates about running its troubled cell phone division.

The company has been hunting for a potential replacement for over four months now.

Former Motorola CEO Ed Zander left the company in November 2007, and was known as a person with some bitter infighting and backstabbing. Even now, while current and former executives won't talk on the record, privately they are quick to blame others.

Plenty of people who once trashed Galvin now sing his praises. Others blame Zander. Or the board. Or Ron Garriques, who ran the handset division while it rode the Razr wave and then bolted to a top job at Dell just as sales began to slide early last year.

After Garriques left, Zander told the board that Garriques created a mess deeper than he had ever realized, according to a person close to the board.

Asked if he was blindsided, Zander told Fortune: "As CEO you're not supposed to be, but I was." (Garriques declined to comment).

Whoever takes the job will have a chance at business stardom - the opportunity to return the famed division to its glory days. But he or she will also have one of the hardest jobs in corporate America.

Motorola, which in December 2006 was posting record profits and sales from its ultra-thin Razr phone, is now on average losing $12 on every cell phone it sells.

With Motorola's stock hovering at around $9, Wall Street is valuing the handset division at a paltry $1 a share.

Even if CEO Greg Brown pulls off the plan to separate the cell phone business next year, Motorola will be a shadow of its once proud self.

Without the cell business, the company is left making products such as set top boxes for cable companies and communications gear for businesses and law enforcement.

Those divisions, with combined revenue of $17.7 billion last year, are providing life support for the ailing mobile unit, which has lost $1.5 billion in the last five quarters.

Motorola has a long history of boom and bust. In the mid-1990s, the company dominated the nascent cell phone market only to miss the shift to digital and get clobbered by Nokia.

And five years ago, after deep cost cuts, a problem with the cameras on its line of flip-top Triplet phones left Motorola unable to ship millions of units for the Christmas season. The board eventually fired CEO Chris Galvin, the grandson of the founder, and brought in Ed Zander, a longtime No. 2 at Sun Microsystems.

On a side note, on May 8, Wall Street raider Carl Icanh increased his stake in Motorola. He now owns a total of 7.6 percent of the company's outstanding shares. In April, Icahn settled a year-long proxy battle against Motorola, when the handset maker agreed to support two of four board nominees proposed by the controversial investor.

At that time, Motorola said that it would seek counsel from Icahn regarding its decision to split off its cell phone business and its search for a new head of the division.

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Source: Motorola.