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Motorola Posts Surprise Profit for Q3

Despite a 28 percent plunge in revenue, Motorola (NYSE: MOT) posted a modest profit and met analysts' conservative estimates for the third quarter -- good news even before two key new smartphones go on sale.

Motorola reported a profit of $12 million, or $0.01 per share, compared to last year's loss of $397 million, or $0.18 a share, which the company attributed mainly to cost-cutting measures. Revenue, however, is down 28 percent to $5.45 billion, due to anemic sales of its handsets.

Still, the mobile maverick managed to meet estimates, as analysts forecasted a flat quarter, with revenue of $5.45 billion, according to Thomson Financial. Additionally, Motorola's $0.01 profit comes after a one-time charge of $0.01 per share for costs relating to Motorola's ongoing plans to split into two independent companies.

The embattled mobile handset giant is hoping to keep its swing to profitability on track through a pair of closely watched phone launches: the Cliq for T-Mobile and the Droid for Verizon, though both Android-powered smartphones won't go on sale until next month.

"We delivered on our commitment to improve the financial performance of Mobile Devices and to commercially launch two smartphones in time for the fourth-quarter holiday season," Sanjay Jha, Motorola's co-CEO and CEO of its Mobile Devices unit, said in a statement.

"The introductions of our new products powered by Android are important milestones as we begin to address the mobilization of the Internet and the growing demand for modern smartphones," he added. "Next year, we will continue to expand our smartphone portfolio and deliver improved financial results."

Despite the gains, Motorola's core wireless division still has its work cut out for it. Sales for the unit fell 46 percent to $1.7 billion, with global market share declining 4.7 percent, down from 5.5 percent in the second quarter.

The unit also realized an operating loss of $183 million for the three-month period. Motorola shipped 13.6 million handsets for the quarter.

Motorola's enterprise mobility unit fared a bit better, with a 17 percent dip to $1.8 billion, as the division still suffers from cuts in spending from business during tepid economic times. Still, the division saw operating earnings of $306 million.

Jha, brought on board last year, has refocused the mobile unit on Google's open source platform Android, and the Cliq and Droid are both garnering positive first impressions in large part owing to the software. The Cliq also uses additional software dubbed Motoblur that streamlines users' social networking information, while the Droid is the first smartphone to run on new Android 2.0 OS.

Motorola's profit may not have sprung up like a jack-in-the-box, but neither did it reverse course after last quarter's small profit and resume its Slinky-like tumble downward. That was enough to give Jha reason for optimism for next year, especially with all the new goodies in the company's toy box.

"We expect significantly better financial results in 2010" primarily due to sales of its new smartphone line-up, he said during the company's earnings call. "I'd be surprised if I don't break even in at least one quarter in 2010, and I think we continue to be committed to that objective."

He also said that Droid does not feature the Motoblur interface, though most future Motorola handsets will have it, and that he expects next year's inventory to offer smartphones targeted at the demographic that now uses lower-end "feature phones".

"We will drive Android down to lower price points. I would then say those are 'low-end smartphones,' as opposed to feature phones," Jha said.