Nov. 30 (Bloomberg) -- Ed Zander, who revived Motorola Inc. with the Razr phone only to see its cachet fade amid gains by Nokia Oyj, will step down as chief executive officer in January.

President Greg Brown, who joined the company in 2003, will take over. Zander, 60, will remain chairman until the annual investor meeting in May, Motorola said today.

Motorola slipped to third in global mobile-phone sales under Zander, a Brooklyn-born engineer who earned his business degree through night school. Nokia widened its lead, Samsung Electronics Co. took the No. 2 spot, and Apple Inc.'s iPhone supplanted the Razr as the cool new phone on the market.

``A change had become necessary,'' said Brad Williams, an analyst at MTB Investment Advisors in Baltimore, which manages $11 billion and sold its Motorola shares this year. ``Zander tried to run too far on the Razr platform.''

Motorola shares have lost 22 percent of their value since Jan. 4, when the company first missed forecasts for sales and profit. They rose 32 cents to $15.97 at 4 p.m. in New York Stock Exchange composite trading.

Pressure on Zander increased as billionaire Carl Icahn mounted a proxy contest for a seat on the board. While Zander won the fight, Icahn said he'd press for him to leave if the business didn't improve by year-end.

Icahn's Pressure

In an interview today, Zander said he started talking to the board about a leadership change this year. Shareholders such as Icahn played no part in the decision, he said. Icahn said today he regarded the leadership change as positive.

``The action of the board was long past due,'' Icahn said in a statement. He also renewed a call for Motorola to be broken up into four separate companies.

Brown, 47, has run four businesses at Schaumburg, Illinois- based Motorola. He led the $3.9 billion purchase of Symbol Technologies, the second-largest transaction in Motorola's history, and returned the automotive business to profitability before selling it for $1 billion.

The biggest challenge is to ``regain the momentum'' of the handset business, Brown said in an interview. ``We've got to get that organization more profitable, refresh the product portfolio.''

MTB's Williams said Brown's appointment won't prompt him to buy Motorola shares again.

``This isn't going to change my opinion because Greg Brown is from within the company,'' he said. ``They should have brought in someone more market-focused rather than technology- focused.''

First Profit

In October, Motorola posted its first profit in three quarters and gave a forecast that surpassed analysts' estimates after eliminating more than 5,000 jobs and unveiling a new version of the Razr phone. Still, sales slumped 17 percent to $8.81 billion last quarter, short of estimates.

``The one disappointment this year has been mobile devices,'' Zander said. ``The management there had a strategy that proved not to be correct. That's been corrected.''

Zander, who marks his 40th year in the technology industry next year, said he's moving to the ``next phase'' in his life and will spend more time with family. He was previously president of Silicon Valley computer maker Sun Microsystems Inc.

Zander will be an adviser to Brown through the end of 2008, and won't stand for re-election to the board at the annual meeting. He will receive a salary and won't get any new equity grants or a bonus. He can also continue to exercise any stock options according to their terms, though he will forfeit any options that haven't vested by Jan. 5, 2009. Zander will also get a $5.3 million deferred bonus from 2004.

He won't get a severance payment since he stepped down, spokesman Chuck Kaiser said.

Nokia Gains

Nokia increased its market share to 38.1 percent of unit sales in the third quarter from 35.1 percent a year earlier, according to Stamford, Connecticut-based researcher Gartner Inc. Samsung boosted its share to 14.5 percent from 12.2 percent, while Motorola fell to 13.1 percent from 20.7 percent.

``Marketing skills'' and ``pizzazz'' were Zander's main contribution, Oppenheimer & Co.'s Lawrence Harris said in an interview. Under Brown, Motorola will accelerate product introductions and focus on cutting costs and improving manufacturing and distribution, Harris said. The New York-based analyst has recommended buying Motorola shares since October.

Zander joined Motorola in January 2004, beating out then- President Mike Zafirovski for the top job. Zafirovski left in 2005 to head Nortel Networks Corp.

Zander replaced Christopher Galvin, the grandson of Motorola's founder, ending the family's 75-year dynasty. Under Galvin's leadership, Motorola had fallen to a distant second behind Nokia. Zander was brought in to close the gap.

Prestige Slips

The all-metal Razr came out months after Zander took over, and has sold more than 110 million units, making it the best- selling Motorola product. As the prestige of the sleek phone started to fade, Zander resorted to price cuts last year to compete with new video and music phones from Nokia and Samsung, as well as e-mail phones from Research In Motion Ltd.

``This man got the company into a pickle,'' Joan Lappin, president of Gramercy Capital Management in New York, said before today's announcement. ``They're continuing to lose share, and he's put the stock in the dumper.'' She sold her Motorola shares last year.

Motorola's stock has gained 23 percent since Zander took over in 2004, lagging behind the 34 percent rise in the Standard & Poor's 500 Index.

IPhone Debut

Competition increased in June when Apple CEO Steve Jobs introduced the iPhone, which blends the iPod media player with an e-mail-equipped handset. Apple, in Cupertino, California, sold out of the iPhone at most of its stores less than a week after the product's debut.

Brown, a basketball fan who supports the Chicago Bulls, has a bachelor's degree in economics from Rutgers University. He was previously CEO of Micromuse Inc., the network-management software company. He also did stints at Ameritech Custom Business Services and Ameritech New Media Inc., and held sales and marketing positions at AT&T Inc.

Motorola was founded in Chicago in 1928 as Galvin Manufacturing Corp., the brainchild of Paul Galvin, who'd failed twice in starting a battery company. Galvin Manufacturing introduced a car radio in 1930 under the brand name Motorola, a combination of motorcar and Victrola, a brand of record player popular at the time.

To contact the reporters on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: November 30, 2007 16:24 EST