UPDATE 5-Motorola CEO Zander to be replaced by COO Brown

(Adds Icahn comment, stock price details)

By Sinead Carew

NEW YORK, Nov 30 (Reuters) - Motorola Inc's (MOT.N) embattled chief executive, Ed Zander, will step down after a year of disappointing earnings and market share losses, raising investor hopes his successor will turn the business around.

Chief Operating Officer Greg Brown, 47, is set to take over as CEO on Jan. 1, Motorola said on Friday. The mobile phone maker has been losing money and customers to rivals such as Nokia Oyj (NOK1V.HE) and Samsung Electronics Co Ltd (005930.KS) amid criticism for failing to come up with a strong successor to its Razr phone.

"It's time for a change," said John Krause, an equities analyst for Thrivent Investment Management, which includes about 900,000 Motorola shares in its $70 billion portfolio.

Krause called for new handset designs and features, cost cuts and an expansion or sale of Motorola's network equipment business, which has been dwarfed by bigger rivals.

"Ultimately we're going to have to see new handsets," he said. "This gives people hope in the near term somebody's going to try to do these things. ... But investors have to be patient. Their patience could be rewarded."

Zander, 60, has come under pressure from shareholders such as billionaire Carl Icahn, who waged and lost a bitter proxy battle for control of Motorola this year.

Icahn may not give Brown much time to turn around the company, saying in a statement on Friday that the leadership change was "long past due" and not enough to address Motorola's "major problems."

Icahn, who holds about 3 percent of Motorola, said it needed to split into several parts to reach its potential and added that it would be particularly important for the mobile phone unit to become a stand-alone company.

Brown, who has worked for Motorola since 2003, was named chief operating officer in March in addition to his role then as head of the network equipment and enterprise unit. The company said Brown did not plan to hire a new COO.

Motorola shifted its focus earlier this year to profitable growth over market share growth at all costs. It also posted its first profit of 2007 in the third quarter. Brown promised to build on these changes.

"We've made a number of changes already," he said in a phone interview. "It's about building on the ones we've made, continuing on the momentum and accelerating new product roll-out and momentum, particularly in mobile devices, and building on the category leadership in the other businesses."

Brown declined to comment on forecasts for the current quarter, or to say when the phone unit would return to profit.

UNDER PRESSURE

Motorola shares closed up 2 percent at $15.97 on the New York Stock Exchange. The stock has lost about 40 percent of its value since October, falling back close to the $14 level it had when Zander joined the company in January 2004.