April 25 (Bloomberg) -- Billionaire investor Carl Icahn won the support of a shareholder advisory service in his fight with Chief Executive Officer Ed Zander for a seat on Motorola Inc.'s board of directors.

Institutional Shareholder Services recommended holders elect Icahn at the annual meeting on May 7, saying that Motorola has ``significantly'' underperformed its peers. Glass, Lewis & Co., another advisory firm, sided with Zander. Motorola opposes the nomination of Icahn, who controls 2.9 percent of the stock.

Icahn plans to use a board seat to pressure Motorola executives to improve profit margins at its mobile-phone business and eventually return more cash to shareholders. Motorola, the world's second-biggest handset maker, reported a loss for its most recent quarter and the first sales drop in four years after losing market share to Nokia Oyj and Samsung Electronics Co.

``It's definitely a significant endorsement of the Carl Icahn position,'' said Brad Williams, a technology analyst at MTB Investment Advisors in Baltimore, which manages $11 billion. ``Maybe what Motorola needs is an outsider's perspective.''

Motorola said in a statement it strongly disagrees with ISS's advice and reiterated that Icahn has no plan to improve the mobile-device business or deliver value to all stockholders. Icahn said separately he is ``gratified'' by the recommendation.

Shares of Schaumburg, Illinois-based Motorola added 27 cents, or 1.5 percent, to $17.91 at 4:01 p.m. in New York Stock Exchange trading. They have lost 13 percent of their value this year after dropping 9 percent in 2006.

Investor Influence

``It's more likely than not Icahn will act as a positive influence on the board by providing a fresh perspective,'' ISS said in its report.

Many large institutional shareholders follow ISS's recommendations on how to vote in corporate controversies. The Rockville, Maryland-based firm analyzes proxy statements and provides voting advice to more than 1,700 clients.

``They're very influential,'' said Williams, whose company owns Motorola stock and is a client of ISS. He said MTB hasn't decided yet which way it will vote on Icahn's board nomination. ``We look very closely at their recommendations.''

Glass Lewis, based in San Francisco, said in its separate report that Icahn's plan for improving Motorola's performance is ``short on details'' and his holding isn't large enough to give him a board seat automatically. Glass Lewis advises more than 300 clients.

`Passive and Reactive'

As part of the battle, both Zander and Icahn have sent several letters to shareholders to gain their support. Motorola says Icahn lacks technology experience and will not simply add him as a director to avoid a proxy fight, while Icahn says his experience would strengthen the board.

Icahn, 71, called the current directors ``passive and reactive'' in a letter to shareholders this month and said they may wait too long to take steps to revive the phone maker. In a response, Motorola urged investors to vote against Icahn.

The billionaire began campaigning for a board seat in January and started a proxy fight last month because Motorola wouldn't endorse his nomination. The founder of Icahn Partners LP owns more than 68 million Motorola shares, making him the sixth- largest shareholder, according to data compiled by Bloomberg.

Icahn worked with businesses in industries from oil and gas to telecommunications and real estate. He built his reputation in the 1980s as a corporate raider, targeting big companies including Phillips Petroleum Co., Texaco Inc. and Trans World Airlines Inc. More recently, he failed to force a breakup of New York-based Time Warner Inc., the world's largest media company.

Making Changes

His background shows ``ability to affect change,'' which is something Motorola needs to improve its financial and operational performance, ISS said in the report.

Icahn this month withdrew his demand that Motorola use all its cash for stock buybacks. He said in an interview earlier this month that he will bring back his push for larger repurchases when the company's handset business reaches an operating profit margin of 8 percent to 10 percent.

Motorola declined to match some handset price cuts by rivals in the first quarter to focus on profitability instead of market share gains. That led to lower unit shipments and a loss at the handset unit, its largest division, stepping up pressure on Zander to release new designs and shore up revenue.

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

Last Updated: April 25, 2007 16:18 EDT