Motorola issues profits warning

Analysts say Motorola needs a better range of phones

Motorola has warned that it will make a loss for the past three months, blaming weak mobile sales in Asia and Europe.

The US-based firm added that its main mobile phone business was likely to make a loss for the whole of 2007.

The twin profit warnings have increased speculation that the firm's chief executive Ed Zander might step down soon, analysts say.

Motorola - the world's second largest mobile phone-maker - has already announced 7,500 job cuts this year.

'Bleak prospects'

Motorola's shares actually rose on Wednesday in anticipation that Mr Zander may step down, but fell in after-hours trading after the results were digested.

The company said sales for the second-quarter period, from April to June, would now be less than $8.7bn (£4.3bn).

What we need is products Lawrence Harris, Oppenheimer

It had previously forecast sales for the period would be about $9.4bn.

This would result in an estimated loss for the period of between 2 and 4 cents a share, the company added.

Phone shipments over the three months fell to 36 million from 45.4 million in the first quarter of the year.

Analysts reacted harshly to the news, arguing that it reflected real weakness in new product development.

"What we need is products," said Lawrence Harris, from Oppenheimer. "Cost-cutting is not sufficient."

Is Ed Zander's future in doubt?

The ability of senior management to turn around the company's fortunes is now being openly questioned.

"With this type of performance and the bleak prospects facing the company for the rest of the year, I don't think Zander's tenure is going to go much further," said Ed Snyder, analyst with Charter Equity Research.

"He's toast. I think it's really close now."

Industry concerns

Motorola attempted to stem some of the criticism by making limited management changes at its troubled mobile phone operation.

Stu Reed, currently president of the firm's integrated supply chain operation, has been appointed president of the mobile phone arm.

Further evidence of tougher times for the mobile phone industry came as Sony Ericsson reported quarterly profits below market expectations.

Profits rose 55% to 327m euros, below forecasts of 385m euros, as the firm gained market share from Motorola.

Mr Zander said that while Sony Ericsson had performed better than Motorola, the results had not "blown the doors down".