(Agencies)
Updated: 2007-11-30 23:31

SCHAUMBURG, Ill. - Motorola Inc. said Friday that Ed Zander will step down as chief executive of the troubled cell phone maker on January 1.

Ed Zander, chairman and chief executive of Motorola Inc. is seen in Las Vegas in this Jan. 8, 2007 file photo. Motorola Inc. said Friday, Nov. 30, 2007, that Zander will step down as chief executive of the troubled cell phone maker on Jan. 1. [Agencies]

Zander, 60, will be replaced by President and Chief Operating Officer Greg Brown as CEO.

The announcement sent Motorola shares up more than 2 percent in morning trading.

Zander will stay on as chairman until the company's annual shareholders meeting in May 2008.

A two-year run of success Motorola enjoyed following the launch of its Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

Motorola has since slipped to third place in the cell phone market behind Samsung Electronics Corp and remains far behind leader Nokia Corp.

Last month, Motorola reported a 94 percent drop in third-quarter profit but still managed to impress Wall Street with its progress, improving from a dismal first-half performance and showing that its turnaround effort may be taking hold.

The cell-phone unit, Motorola's biggest, saw quarterly sales plunge 36 percent to $4.5 billion and recorded an operating loss of $138 million. That was nearly $1 billion worse than a year ago but only about half the $264 million loss of the second quarter.

Brown joined the company in 2003 and has served as president and COO since March. Prior to joining Motorola, Brown was chairman and CEO of Micromuse Inc., a network management software company.

Zander will continue to serve as an adviser to the CEO through January 5, 2009, and until then will continue to receive his regular base salary and benefits. Zander's stock options and restricted stock units also will continue to vest and be exercisable during that time.

Motorola said in a filing with the Securities and Exchange Commission that Zander won't be eligible to participate in its 2008 incentive bonus plans, won't receive any new equity grants in 2008 and will forfeit any stock options and restricted stock units that haven't vested as of January 5, 2009.

A total of about $5.3 million of previously earned but deferred compensation will be paid out, representing the current value of Zander's 2004 annual bonus which had been deferred.

Motorola shares rose 39 cents, or 2.4 percent, to $16.04 in morning trading Friday. The stock remains down in 2007 and is about 40 percent off its six-year high of $26.30 reached just a little more than a year ago.