Ed Zander, Motorola's embattled chairman and chief executive, has finally yielded to shareholder pressure and stepped down from the mobile phone giant after failing to reverse its declining profits.

Mr Zander will leave Motorola, which has issued two profit warnings within five months this year, on January 1 and will be replaced by the chief operating officer, Greg Brown, who has been with the company since 2003. Mr Zander will retain the chairman role until May 2008.

Samuel Scott, lead director on Motorola's board of directors, said, “I want to take this opportunity to thank Ed for his vision, expertise and tireless commitment to Motorola.

"We greatly appreciate his many contributions and wish him all the best in the years ahead. Today’s decision is the culmination of a thoughtful and disciplined process of succession planning.”

Last month, Motorola posted a 94 per cent fall in third quarter profits and sales down from $10.6 billion to $8.81 billion. It admitted that sales of its handsets had fallen by 36 per cent.

The company has fallen to third place behind Nokia and Samsung in the mobile handset market and has been forced to cut prices, which in turn has damaged its margins.

Earlier this year Carl Icahn, the billionaire activist investor who owns 3 per cent of the group, criticised Mr Zander for his leadership of Motorola.

The company struggled to replicate the success of its Razr handsets, with models such as Pebl failing to sell as well. In July, Motorola admitted it was unlikely to make a profit for the full year due to poor handset sales in Asia and Europe.

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