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Motorola Burned on Q2 Sales Hopes

Thanks to weak cell phone shipments in Europe and Asia, Motorola  said it expects second-quarter sales to be between $8.6 billion to $8.7 billion and that its mobile device unit will not be profitable for the full year.

The news, which sent Motorola shares down 20 cents to $17.75 in morning trading, has prompted at least one analyst to say Samsung would catch Motorola before Motorola catches market leader Nokia .

Motorola had originally targeted $9.4 billion in revenues for Q2. The company said in a statement it expects Q2 mobile device shipments to be approximately 35 million to 36 million handsets, or almost 10 million fewer units than the company sold in Q1.

The company also said it expects a second-quarter loss per share of 2 cents to 4 cents from continuing operations, including charges associated with the layoffs it announced.

Motorola added that its mobile device business is expected to have a larger operating loss in Q2 compared to Q1, and the unit will not be profitable for the full year. In related news, the company said Stu Reed, executive vice president of Motorola's supply chain organization, has been installed as president of Motorola's mobile device unit.

Motorola said it will provide further perspective on the year during the company's quarterly earnings call on Thursday, July 19. The company will also provide an update on the its strategy and progress at its financial analyst meeting, which has been rescheduled for sometime in September.

No buts about it, Motorola has had a rough year.

With competition to pump out the latest and greatest smartphones at level 10, Motorola has been struggling to keep up with Nokia, which has attracted interest with strong multimedia capabilities in its newer handhelds. The high-profile splash of Apple's new iPhone is anything but aloe for these burns.

In January, Motorola slashed 3,500 jobs after a 48 percent income drop in Q4 2006. Two months later, the company lowered Q1 guidance, citing poor performance of, what else, its cell phone unit.

Despite the warnings and job cuts, Motorola launched a new line of multimedia-intensive Razrs and Rokrs at a Mew York press event in May, only to temper any enthusiasm by announcing 4,000 more job cuts two weeks later.

The flagging financials have left some investors, including luminary investor Carl Icahn, to demand CEO Ed Zander to step down. Icahn, not one to watch a company he has a fiduciary interest in struggle, was denied a board seat in May after a proxy fight.

Experts speculate that shareholders are giving Zander, who enjoyed success at Sun Microsystems , ample opportunity to right the ship.

But at what cost? Cowen and Company analyst Matthew Hoffman surmised in a research note Thursday that "instead of catching Nokia for the global share lead, it now looks as though Samsung will catch Motorola."

"We believe Motorola's depressed unit volumes are company specific in 2Q," Hoffman said in his note. "We expect strong quarter-to-quarter unit progress from Samsung will be reported tonight, possibly exceeding Motorola for 2Q07."

Motorola has not been alone in its struggles; Palm is suffering from similar handset weaknesses and sold a 25 percent stake to private-equity firm Elevation Partners under a recapitalization plan.