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By Marguerite Reardon, 1 August 2008 08:54

NEWS

Motorola surprised Wall Street Thursday by reporting a small profit and steady market share in its troubled handset business for the second quarter of 2008.

The key to Motorola's success for the quarter was cost-cutting and strong performance from businesses other than its handset division. As a result, the company was able to announce a $4m profit, or less than one cent per share, which helped turn the tide on a year-long trend of losses. Motorola had actually forecast it would lose about two cents per share.

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Revenue was $8.08bn, down from $8.73bn. But it still beat expectations of $7.5bn in revenue.

Motorola's Home and Networks Mobility and Enterprise Mobility divisions brought home the bacon with strong sales of $2.7bn for Home and Networks and $2bn from Enterprise Mobility.

The handset business narrowed its loss to $340m from $347m.

Motorola managed to hang on to its number three position in the global handset market, shipping some 28.1 million handsets during the quarter. The company had been expected to lose share to market leader Nokia and second place Samsung Electronics. But Motorola hung onto to its position mostly due to stronger sales in the US.

Motorola CEO Greg Brown told analysts and investors on a conference call that Motorola actually took share in the US due to the sale of low-cost 3G handsets. The company sold three million Razrs in the second quarter and one million Razr2s. And despite the hype surrounding the iPhone, Motorola still managed to sell one million Rokrs, the company's music-playing phone.

While Motorola may not have lost worldwide market share, it's clear the company is heavily reliant on sales in the US. About 48 per cent of the devices the company shipped during the quarter were to this market, compared with only 14 per cent for Asia.

Brown said the company expects sales to fall sequentially in the third quarter as Motorola continues to lose market share abroad.

But the company is planning to release some new handsets featuring touchscreens and smart phone capabilities, which it hopes will help revive sales in all markets.