Motorola discovers cheaper phones lead to lower profits

Motorola has announced its second loss-making quarter, pushing the beleaguered manufacturer into third place behind Nokia and Samsung.

Motorola made a loss of $28m this quarter, compared to a $1.38bn profit in the same period last year.

Handset sales slipped 30 per cent, and income from sales of handsets dropped 40 per cent, reflecting the limited range Motorola is offering at the moment and its targeting of the cheaper end of the market.

In the US, where Motorola sells more than a third of its handsets, all eyes have been on the iPhone and competing devices, of which Motorola still has none.

But cost-cutting measures should turn the situation around, chief financial officer Tom Meredith said: "In addition to cost controls and headcount reductions, which we expect will result in cost savings of $1bn in 2008, we intend to significantly improve our cash conversion cycle and our return on invested capital".

A few new handsets probably wouldn't hurt either. ®