Motorola loss widens, market share slides

By Sinead Carew

NEW YORK (Reuters) - Motorola Inc's (MOT.N) quarterly loss widened on weak cell phone sales, signaling further market share losses, especially in North America, to rivals such as LG Electronics Inc (066570.KS), and sending shares down as much as 5 percent.

Motorola, which plans to spin off its mobile devices business next year after more than a year of losses, also missed Wall Street estimates on first quarter revenue and forecast a deeper-than-expected second-quarter loss.

"They're stuck. They're in quicksand now. They're not going to get out," said Charter Equity Research analyst Ed Snyder, adding that Motorola's survival in cell phones becomes more difficult if it keeps losing market share as expected.

Motorola, the No. 3 U.S. mobile provider, said on Thursday its share of the global mobile market fell to 9.5 percent, about one-fourth the share of market leader Nokia (NOK1V.HE), and less than half its own market share of 23.3 percent at the end of 2006.

Motorola has failed to come up with a strong line up of high-end handsets since launching the Razr in late 2004, even as it faces new competition from the likes of Apple Inc's (AAPL.O) popular media-playing iPhone.

"We didn't expect much and we didn't get much," said American Technology Research analyst Mark McKechnie.

Motorola blamed the sharp market share drop from 12.4 percent in the fourth quarter on a weak line-up of phones with high-speed Web links primarily in North America, its top market where its biggest rivals are LG and Samsung Electronics (005930.KS).

Analysts said Motorola was likely to lose even more market share in the second quarter, based on its own forecasts that show cell phone revenue could be flat despite an expected small increase for the overall market.

Motorola's first-quarter loss widened to $194 million, or 9 cents per share from $181 million, or 8 cents a share a year ago. Before a charge of 4 cents a share for job cuts and other items, its loss was 5 cents a share, a penny better than the average analyst forecast, according to Reuters Estimates.

The world's third biggest mobile phone maker said net sales fell to $7.45 billion from $9.43 billion. Analysts on average had expected revenue of $7.85 billion.

INVESTOR PRESSURE

Motorola recently ended a proxy fight with major shareholder Carl Icahn after it agreed to allow two of his proposed slate of directors onto the board, but still faces investor pressure to turn its businesses around.

Chief Executive Greg Brown, who has been publicly criticized by Icahn, stopped short of saying the worst was over for the mobile device unit but forecast a second quarter operating loss comparable to the first quarter.

"It's all about building momentum," Brown said in a conference call with analysts, where he promised three new phones with high-speed Web links in the second quarter.

"We have a very limited portfolio globally as well as here," in North America Brown said in an interview referring to high-end phones. He said he was "optimistic about the prospects for restoring" the unit but gave no timeframe.