UPDATE 2-Unilever's strategy in spotlight after dropping $68 billion GSK battle

* Unilever gains 2%, GSK shares slip

* Analysts largely positive on Unilever decision

* Questions over boss Alan Jope's strategy remain
(Recasts with investor, analyst comments)

By Pushkala Aripaka

Jan 20 (Reuters) - Unilever's strategy was under
the investor microscope on Thursday after the consumer goods
giant effectively abandoned its $68 billion pursuit of
GlaxoSmithKline's consumer healthcare business.

Shares in Unilever, the maker of a range of brands such as
Dove soap and Hellmann's mayonnaise, gained 2% after the company
said late on Wednesday that it would not raise its rejected 50
billion pound offer.

It said its view on the value of the healthcare business had
not changed despite GSK lifting financial forecasts for the
unit, which is 32% owned by Pfizer and makes products
such as Sensodyne toothpaste and Panadol painkillers.

Many market watchers felt Unilever's management, under
pressure after a 31% drop in its share price since highs seen in
late 2019, had been wise to not get drawn into upping their bid
for a business that GSK has said it wants to spin off.

Barclays analysts called it a "smart move," saying that the
decision "shows that whilst Unilever remains very keen on the
asset, it is disciplined and will not do the deal at any price."

Yet others said the proposed mega-deal - which would have
been one of the largest ever on the London market - had been
unexpected for many investors. They said it raised questions
about the company's plan under Chief Executive Alan Jope for a
more gradual shift towards health, beauty and hygiene products
and away from lower-margin goods.

"From our discussions with shareholders and Unilever share
price action, we believe there is a clear discontent with
management and the board over the changed strategy and focus on
transformative M&A," J.P. Morgan analysts said in a note.

Meanwhile, a group of Unilever investors said on Thursday
they had filed a fresh resolution urging the company to fix a
"crucial blind spot" in its strategy and set ambitious targets
to sell healthier foods.

It came after fund manager Terry Smith, whose Fundsmith
vehicle is a top-10 Unilever investor, lambasted the company
last week for being "obsessed" with promoting its sustainability
credentials at the expense of performance.

'CALLED THEIR BLUFF'

GSK, led by Chief Executive Emma Walmsley, has stuck to its
plans to spin off the consumer healthcare unit despite previous
pressure from activist investors to consider alternatives such
as a sale.

It had rejected three approaches from Unilever, and the
final proposal made on Dec. 20 comprised 41.7 billion pounds in
cash and 8.3 billion pounds in Unilever shares.

GSK shares were down 1.3% by 12125 GMT, after having slipped
just over 2% earlier.

"In this condition Unilever cannot increase any offer, not
because the value of GSK's consumer (unit) would not warrant it,
but simply because Unilever's investors expressed a
no-confidence vote on Unilever's CEO doing any deal of this
size," an investor in GSK who declined to be named told Reuters.

Other large takeover targets could be available for Unilever
to consider.

The consumer remedies industry, traditionally a part of the
prescription drug sector, is in a phase of major transformation.
Johnson & Johnson in November unveiled plans to spin off
its consumer health division, owner of Listerine and Baby Powder
brands, to focus on pharmaceuticals and medical devices.

Barclays analysts have questioned whether GSK had overplayed
its hand.

"By saying (GSK) sees £50 billion as fundamentally
undervaluing the business, it now makes it very difficult to
accept the £50 billion on the table whilst still saving face,"
they said.

"Some investors think that Glaxo may have overplayed their
hand and Unilever has called their bluff."

($1 = 0.7341 pounds)

(Reporting by Pushkala Aripaka in Bengaluru and Simon Jessop in
London; Editing by Keith Weir, Shounak Dasgupta and Pravin Char)