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Motorola Posts Quarterly Loss as Phone Sales Weaken

Motorola on Thursday posted a quarterly loss as revenue fell amid weak phone sales and the company loses market share.

The company, hurt by price competition and a lack of advanced phones, posted a loss from continuing operations of $38 million, or 2 cents a share, compared with a profit of $1.35 billion, or 54 cents per share, a year earlier.

Including earnings from discontinued operations, Motorola said, its net loss would have been $28 million, or 1 cent per share.

Motorola's Razr V3 cell phone.
AP
Motorola's Razr V3 cell phone.

Net sales fell 19% to $8.7 billion from $10.82 billion.

The company shipped 35.5 million mobile phones in the quarter, giving it an estimated 13.5% share of the global market. Motorola likely fell to third place from second in the global market, behind industry leader Nokia and Samsung Electronics.

"The big worry remains the top line and market share in handsets where they're ceding a ton," said Cowen & Co analyst Matthew Hoffman.

He said it was worrying that Motorola also appeared to lose market share to smaller rivals such as LG Electronics and Sony Ericsson, a venture of Sony and Ericsson .

Motorola's mobile device unit sales fell 40% from a year ago to $4.3 billion, and the unit posted a loss of $264 million, compared with operating earnings of $804 million a year ago.

The company expects earnings per share from continuing operations in the third quarter to be flat to slightly up from the second quarter earnings excluding items such as reorganization charges.

Motorola repeated its expectation that the mobile devices business would not be profitable for the full year but it said it expects "its financial results to improve in the second half of the year."

Cowen's Hoffman said that Motorola's lack of revenue guidance could mean that it expects to see more declines.

"It means they're prepared to continue to let share decline with is a longer term concern," he said. "The main thing that will improve the long term profitability of Motorola is an improvement of the handset portfolio."

It has been losing out to rivals after failing to develop a popular follow-on to its flagship Razr phone. Motorola shares have lost about a third of their value since mid-October, closing at $18 on the New York Stock Exchange on Wednesday.

Motorola said its enterprise wireless unit, which sells equipment to corporate and government customers saw revenue increase 42% to $1.9 billion.

Sales for its television set-top box and network equipment business, which supplies to service providers, rose 9% to $2.6 billion.

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