Disclosed is a cathode active material and a method to produce the same at low cost. The cathode powder comprises modified LiCoO2, and possibly a second phase which is LiM′O2 where M′ is Mn, Ni, Co with a stoichiometric ratio Ni:Mn≧1. The modified LiCoO2 is Ni and Mn bearing and has regions of low and high manganese content, where regions with high manganese content are located in islands on the surface. The cathode material has high cycling stability, a very high rate performance and good high temperature storage properties.