[cwilliams706]

August 1 2008 - 11:23 am EDT | John Pletz | Crain's Chicago Business

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Motorola Inc. says its troubled handset business is improving and will be stronger by the end of the year, but CEO Gregory Brown isn’t willing to say when he expects the unit to break even.

Yet Brown insists the division, which lost $346 million in the second quarter, will continue to improve with help from more profitable new phones and continued cost reductions in the second half of this year.

Motorola's stock bounded 12% higher Thursday on surprise news that the communications giant posted a small profit.

Brown told Crain’s Chicago Business on Thursday that the company isn’t planning any more job cuts beyond the 2,600 layoffs announced in April. Schaumburg-based Motorola employs about 15,000 in Illinois.

Brown said he expects to roll out about 34 new phones by year's end, more than double the number introduced in the first six months of the year. That’s likely to include an answer to Apple Inc.’s popular iPhone, a Web-friendly phone with a touch-sensitive screen. The phone is now in its second generation, accompanied by look-alikes from most rivals, except Motorola.

Brown said new phones in the second half of the year will have “capabilities that will include touch and messaging . . . and we’ll be looking to enhance our smartphone portfolio.”

Asked whether such a phone will be in U.S. stores by Christmas, he said, “That’s a reasonable expectation.”

Brown declined to comment on the specifics of the planned product. But a person familiar with Motorola’s road map says the company has shown at least 10 to 12 new products so far, including a touch-screen smartphone similar to HTC Corp.’s popular Touch. The Motorola product has been referred to as Halo. A version called the Blaze, made for Verizon, has appeared on several Web sites and blogs that track new cellphones.

However, analysts remain skeptical that the company’s phone business can achieve the improvements in profit margins and cost reductions and hold the line in marketshare against a strong lineup by LG Electronics Co. Ltd., Apple, BlackBerry maker Research In Motion Ltd. and Samsung Electronics Co. Ltd.

Nonetheless, Motorola shares surged 12%, or about 96 cents, to close at $8.64 Thursday as the company said it made a small profit in the second quarter after taking charges of 2 cents per share, beating analysts’ expectations. Motorola also says it expects to earn 6 cents to 8 cents per share for the full year, far better than the 1-cent profit expected by analysts surveyed by Thomson First Call.

Motorola on Thursday said for the first time that the spinoff of the phone business will happen by the third quarter of next year.

But Brown has a huge to-do list to make that happen. It includes:

--Finding a CEO to run the phone business and sell it to Wall Street. “We’re making very good progress and will keep you posted,” Brown told analysts after reporting quarterly earnings Thursday morning.

--Deciding whether the handset business, the remaining company, or both, will get the Motorola brand. “There has been no decision on the Motorola brand,” Brown said. “I recognize how critical Motorola’s brand is to mobile devices. But it’s also very important . . . to some of the other businesses.”

--Divvying up the patent portfolio of an 80-year-old technology giant in businesses from cellphones and two-way radios to set-top TV receivers and bar-code readers. “That analysis is not yet complete,” said Paul Liska, Motorola’s CFO.

[Janice]

I can see why all the carriers are trying to come out with similar phones. There's so many people out there who are stuck in contracts and don't want to be penalized just for a new handset.