Technology Industry

In the epic battle of Barry Diller versus John Malone, the victory is going to Diller. Too bad the courts can’t mandate a recovery in InterActive Corp.’s flagging operations.

Stephen Lamb, a chancery court judge in Delaware ruled in favor of Diller, who had assumed rights to vote the proxy of other investors to decide whether to spin off pieces of the Internet-commerce conglomerate into smaller companies. One big investor — Malone’s Liberty Media - objected to the spinoff and to Diller using his votes. But the court said Diller can do just that.

A copy of the 79-page decision is available on PaidContent.org, as are some choice highlights.

the court concludes that Liberty has failed to demonstrate that Diller has breached or threatened to breach any contractual duty he owes to Liberty. In particular, the court rejects Liberty’s claim that the proposed single-tier spin-off gives rise to any right of consent on Liberty’s part. It follows that the proxy remains in effect, with the consequence that the Liberty parties who purported to execute written consents on January 28, 2008, lacked the power to vote Liberty’s shares in IAC.

Thus, the court will enter judgment in the section 225 action in favor of the defendants. The court also concludes that Liberty’s various other contract-based objections to the proposed spin-off lack merit and should be dismissed on the basis of the record that now exists.

Say your company is on the ropes and you launch a major initiative to grab headlines and show you’re serious about turning things around. The last thing you want is someone stealing your thunder.

That’s the situation faced by Motorola, the tech giant that said Wednesday it’s splitting up into two companies. One will sell the mobile handsets that have pretty much carried its brand this decade, and the other will be dedicated to everything else: cable TV set tops, two-way radios, network equipment, etc.

Motorola issued a PR release with its new CEO Greg Brown saying all the bland and anodyne things a good CEO is obliged to:

“Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus – as well as more targeted investment opportunities for our shareholders.”

Woo-hoo! But over at Engadget, they got a hold of a letter from an angry insider, written last month but broadcast at a very inconvenient moment for Motorola. Numair Faraz, who reported to Motorola’s chief marketing officer Geoffrey Frost until his sudden death a 55 in 2005, ripped Motorola a new power socket in an overnight classic of insider venting.

As I told Zander in a phone call in 2007, I felt that he was setting the company up for massive failure. He had the audacity to say, “Well, maybe Geoffrey should have come up with a better successor to the RAZR,” and told me to “Wait for big things in 2008.” I guess he was right — the golden parachute he got for his exit from the company was worth about 30 million dollars — and that doesn’t include his accumulated Motorola stock.

The outlines of Faraz’ complaints are harsh. He says former CEO Ed Zander cared more about his golf score than running a company, and accused him of working Frost to death. In the end, Motorola opened up its doors to that virus Carl Icahn - who can’t successfully raid a company unless its mistakes are all wrapped up, put in a basket and placed on his front porch.

Engadget says it held onto the scathing letter until it could look into it matters a bit, but if found some things to justify the bitterness:

In researching the myriad claims raised in this letter — which we believe to be true — we also discovered a number of other unsettling things about Motorola’s corporate past in the last five years, such as certain gross corporate excesses demanded by Zander and his inner circle (like a small fleet of extravagant private jets, where most companies that size might only have one, if any), or the fact that Motorola’s current CEO, Greg Brown, is so technologically out of touch he refuses to use a computer for communications, and has all his email correspondences printed by his secretary and replied to by dictation.

Memo to old-school tech executives in 2008: You can still spin a restructuring, but know it can be unspun from inside. And don’t be surprised if someone - journalist or blogger - fact checks it. Cutting your losses when an aggressive investor attacks used to mean slashing jobs and pushing remaining workers that much harder. Now it’s more complicated: those workers can easily fight back.

Oh, and learn to type your own emails.

Consumer demand for gadgets may be cooling off a lot faster than expected. That seems to be the case with NAND flash-memory chips, which have been used to power popular devices such as MP3 players and portable memory cards.

The latest evidence comes from Toshiba, the Japanese tech giant that is the second largest producer of flash memory chips, behind Samsung. Toshiba warned that its profit will be weak this year - declining for the first time in six years - in part because of a sudden lapse in demand for the chips.

Of course, much of Toshiba’s problems stem from losing the standards battle in high-definition video to Sony’s Blu-Ray format. Toshiba said its HD DVD business would show a $666 million operating lost and cost another $460 million to shutter the division.

But Toshiba also had bad news in its semiconductor business, where revenue will come in at 1.39 billion yen, instead of the 1.44 billion it forecast last October. The company noted in a statement, “The Semiconductor business has seen a significant decrease in operating income due to larger than anticipated declines in sales prices of NAND flash memories.”

The announcement echoes a similar one from Intel this month, which cited NAND price declines as a weak spot. Intel had only 3 percent of the flash-memory market last year, while Toshiba had 27 percent.

Last month, research firm iSuppli revised down its forecast for global NAND flash revenue to growth in the single digits from growth of 27 percent. At the time, analyst Nam Hyung Kim said,

“Unless the economy recovers vigorously later this year, last year’s DRAM market disaster could be repeated in NAND this year… NAND suppliers are likely to go into the red in the first quarter, and are not likely to recover in the second.”