Icahn turns up heat on Motorola

(Fortune) -- Carl Icahn upped the pressure in his proxy battle with Motorola on Monday by filing a new lawsuit, demanding again that the company spin off its mobile phone business.

Accusing the board and management of mishandling the all-important cell phone division, Icahn's suit seeks, among other things, internal communications related to the company mobile phone strategy. Icahn is seeking to have four candidates elected to the Motorola board. He rejected a compromise offer made by Motorola on Monday that would have given the dissidents two director seats.

Motoroa did not return a phone call seeking comment.

Icahn and his investment partners hold 144.5 million shares, or about 6.5% of Motorola's outstanding stock. The group has more than quadrupled the size of its stake since early last year, when Icahn first made public his criticisms of the wireless tech titan.

Motorola's stock has fallen by half since Icahn's arrival as a big stakeholder, hitting a four-year low last week of $8.98. It's hard to tally how much of a decline Icahn's group has seen as the money managers have been actively hedging their investments in the options market.

In a statement Monday, Icahn's group points to a year of disappointments from Motorola (MOT, Fortune 500) management led by CEO Greg Brown, noteing the swing to a loss in the mobile phone business and the turmoil in the executive ranks with "two CEO's and three CFO's in little over a year."

But industry investors don't see a spinoff as the answer to Motorola's problems. The underlying issue, they say, is Motorola's lack of popular phones that can be made more profitably.

Motorola's market share fell to second place behind Nokia (NOK) in the late 1990s due in large part to its delayed conversion to digital phones. Last year, Motorola fell to third place behind Samsung in the wake of the Razr's fall from fashion. This year, Motorola is on track to be surpassed by No.4 player Sony Ericsson unless it can turn its fortunes around.