NEW YORK

Motorola Inc. posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cell phone division. Motorola said it will postpone the planned spin-off of the unit, originally planned for the third quarter of next year.

The maker of communications gear lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago.

Sales fell 15 percent to $7.48 billion.

The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cell phone operations. Analysts polled by Thomson Reuters had on average expected the company to earn 2 cents per share on revenue of $7.82 billion.

For the fourth quarter, Motorola said it expects to earn 2 cents to 4 cents per share. Analysts polled by Thomson Reuters had expected the company to earn 7 cents per share in the quarter, excluding items.

Shares of Motorola fell 30 cents, or 5.5 percent, to $5.16 in early trading, even as the broader market rallied.

Chief executive Greg Brown said the company was extending its cost cuts across its operations, which should lead to savings of $800 million next year. The company has cut thousands of jobs this year, but it didn't announce any specific new cuts on Thursday.

Motorola sold 25.4 million cell phones in the third quarter, down from the 28.1 million it sold in the second quarter. The company had said it expected a slight decline. With an 8.5 percent market share, it lost the spot as No. 3 cell phone maker worldwide to Sony Ericsson in the quarter, according to research firm IDC. Nokia Corp. and Samsung Electronics Co. are No. 1 and No. 2, respectively.

The cell phone unit lost $840 million, including a $370 million write-down of inventory. Revenue was $3.1 billion.

Sanjay Jha, who was appointed in August to lead the handset division, said the weak economy and stresses in the financial market were main reasons for the postponed spin-off. He said the unit would slim down its product portfolio and become a leaner organization.

Jha said the company had 20 major platforms for cell phones, making development unwieldy yet leaving Motorola with few products in the two categories that have been in demand this year: "smart" phones and very cheap phones.

He is pruning the portfolio to focus on three software systems: Windows Mobile, which Motorola already uses on a few smart phones; P2K, its own system, used on the Razr phone; and Android, a free operating system from Google Inc. Competitor HTC Corp. recently launched the first Android phone. Jha said Motorola will have one by the 2009 holiday season.

Designers at Motorola have been too focused on making "bright shiny objects," Jha said. In the future, he wants them to focus more on making phones easy to use.

The troubles of the cell phone division stem from its inability to produce a follow-up to a phone that was, for a while, the "bright shiny object" everyone had to have: the Razr phone.

Jha also said Motorola will pull back from the cell phone markets of Europe and parts of Asia, though Jha said China will remain a focus for the company, along with the Americas.

Motorola is not alone in seeing a decline in cell phone sales. IDC said Thursday that global handset shipments declined 0.4 percent from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.

Sales at Motorola's healthier units were essentially flat, and they boosted profits.

Home and Networks Mobility, which makes cable-TV set-top boxes, modems and related gear, saw its operating earnings increase 65 percent to $263 million, on $2.4 billion in sales.

Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $403 million, up 23 percent, on sales of $2 billion

Amid a boom in social-network-friendly handsets, Motorola prepares a new entry, but its Android may not debut until 2009's second quarter

Photo: Getty Images; Illustration: Angelos Dosoulas

As the wireless world awaits the Oct. 22 debut of the first phone based on the Google-backed Android software, engineers at Motorola (MOT) are hard at work on their own Android handset. Motorola's version will boast an iPhone-like touch screen, a slide-out qwerty keyboard, and a host of social-network-friendly features, BusinessWeek.com has learned.

Motorola has been showing spec sheets and images of the phone to carriers around the world in the past two months and is likely to introduce the handset in the U.S. sometime in the second quarter of 2009, according to people familiar with Motorola's plans. Building a phone based on the highly anticipated Android operating system is part of Motorola's effort to revive a loss-making handset division that has forfeited market share amid a drought of bestselling phones. Motorola stock, which on Oct. 17 rose a penny to 5.62, is hovering near a 16-year low.

The phone will appear among a new class of social smartphones designed to make it easy for users to connect quickly and easily to mobile social networks such as Facebook and News Corp.'s (NWS) MySpace (BusinessWeek, 10/10/08). Such phones let users message in-network friends directly from phone contact lists, for example. A Facebook representative declined to comment on the company's work with Motorola. MySpace.com didn't respond to a request for comment.

Motorola declined to elaborate on its plans, but said in a statement: "We're excited about the innovation possibilities on Android and look forward to delivering great products in partnership with Google (GOOG)" and the community of developers known as the Open Handset Alliance that are working on the Android operating system.

Mobile Networking Wave

In the next year, social networking phones are expected to be a hit with the 16- to 34-year-old crowd, analysts say. According to consultancy Informa (INF), the number of mobile social-networking users will rise from 2.3% of global cell-phone users at the end of 2007 to as many as 23% of all mobile users by the end of 2012.

The Android handset will feature a touch screen about the size of those on Apple's (AAPL) iPhone, people familiar with the phone say. While it takes some of the design cues from Krave ZN4, the first touch-screen phone from Motorola launched with Verizon Wireless on Oct. 14, it's not certain whether the Android phone screen will feature Krave's distinctive and interactive clear flip screen.

Like the world's first Android phone, from HTC, Motorola's Android-based device will offer a slide-out Qwerty keyboard. People who've seen the pictures and spec sheets for the device say it looks like a higher-end version of the HTC phone, called the T-Mobile G1. But it's expected to sell for less, at prices similar to the Krave, which is available for $150 with a two-year contract. After carrier subsidies, the G1 will retail for $180 with a two-year contract.

Slow Off the Mark

Motorola's new phone likely won't be ready to launch in the U.S.