I'm as much of an admirer of Carl Icahn's business acumen as anyone, but his recent comments regarding the situation at Motorola (NYSE: MOT) are puzzling to me. After demanding that the company put its cash hoard ($6.43 cents per share) to use buying back stock, Icahn has now changed his tone, instead focusing on operational issues. In a letter to the company attached to a proxy filing, Icahn wrote that "Until our operational problems are corrected, buy-backs and other transactions that might have looked appropriate earlier need to take a back seat." Icahn also criticized the board for being "passive and reactive."
While there is certainly validity to Icahn's criticisms of the board and operations, I wonder why it makes sense to put a buy-back on hold. Why correct operational problems first, and then buy back stock at a higher price later? This is not a method that will create value for the company. On the other hand, buying back shares while tackling operational issues would give shareholders who don't want to wait around a slightly higher price for their shares -- and, if the turnaround is successful, the remaning shareholders would benefit from the retiring of stock at lower prices.
It seems to me that correcting operational issues while buying back stocks is the way to go here.
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