Carl Ichan has upped his stake in Motorola (MOT) to 2.9% from 2.7%. The raider wants the telecom equipment and handset manufacturer to do something with its $11 billion in cash.

Icahn would probably be satisfied if MOT bought back some shares, in essence raising earnings per share (as long as the company doesn’t make a habit of losing money). Or, the firm might start to pay a much larger dividend. Currently, Motorola’s yield is 1.1%. With the cash on hand, it would not surprise anyone that they could double that.

Of course, either of these actions by Motorola would benefit Icahn. And, Icahn would argue that it would benefit all the other shareholders as well.

That may be true, but it may only be true short term.

The most significant problem at the company is that its RAZR handset was a one-hit wonder. It sold like hot cakes but did not have the "legs" of something like the Apple (AAPL) iPod which has sold 100 million units. Apple says most customers getting an iPod are first-time buyers.

Motorola, on the other hand, has to replace the RAZR with something that will sell as well as it did. That has not happened. It also may not happen, which leaves the company in a bind.

Motorola’s other big business is telecom equipment. It is the big infrastructure products that large telephone companies use to build their networks. If the handset business is going to take a long time to recover, the telecom equipment side of the house may have to pick up its pace.

That takes Wall St. back to the $11 million. There are at least two telecom equipment companies that could use new owners.

One is the newly merged Alcatel-Lucent (ALU) which has a broad array of products and a massive sales force. It is badly run and the integration of the two companies is going poorly, but that may be an opportunity for a new parent. The potential cost cuts coming from combining the two companies are significant. Alcatel-Lucent has a market cap of $29 billion. Despite its troubles, Morningstar writes glowingly about the company: "Alcatel-Lucent is one of the few truly global, diversified telecom equipment vendors, which should help insulate it from the spending whims of any one carrier."

The other company in the sector that has been doing poorly but now appears to be getting firm footing is Nortel (NT). The company has both large wireline and wireless businesses. It is run by a former Motorola senior executive. It has a market cap of $10.5 billion.

Mr. Icahn wants his money back. Motorola might be better served using its cash to build a broader base outside the handset business. It would make the road ahead a littler smoother.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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