Motorola, which trails rivals Nokia
They continue to execute very well on the things they can control, on the cost and the cash flow, said Avian Securities analyst Matthew Thornton.
Motorola has lost ground to rivals for more than two years as it struggled to come up with hit phones.
It shipped 14.8 million phones, down from 28 million phones a year earlier but higher than the average forecast of 14.1 million from five analysts contacted by Reuters.
This gave Motorola a market share of 5.4 percent for the quarter, according to research group Strategy Analytics, compared with 20 percent in 2006 when the company benefited from its then-popular Razr phone. Nokia's current market share is 37.8 percent.
The company is concentrating on weeding out unprofitable phone lines and is betting its recovery on advanced phones based on Google Inc's
We're essentially missing from the smartphone segment, Sanjay Jha, Motorola's co-chief executive and head of the mobile phone business, told Reuters. Our ambition for the fourth quarter is quite modest. It's to be back in the game and build upon that as we go into 2010.
Morgan Keegan analyst Tavis McCourt noted that Motorola's phone sales were helped by subscriber growth at Sprint Nextel Corp's
Motorola raised its 2009 cost savings target to $1.8 billion from $1.7 billion and said it cut 8,000 jobs in the first half of the year. Motorola said the jobs cuts related to previously announced plans.
Its cash position rose $360 million to $6.5 billion in the second quarter. In comparison, investors had taken fright in April when Motorola said its cash had fallen $1.3 billion to $6.1 billion in the first quarter.
Motorola's Jha said the company has agreements in place with carriers and is on track to bring new devices to the market for the holiday shopping season.
On a quarterly basis, both myself and investors would be disappointed if we don't break even in at least one quarter, he said.
ANDROID LAUNCH PLANS
The executive said Motorola was getting a good response from carriers to its Android devices due to hit the market later this year and early in 2010.
We expect to launch two with two major carriers in the United States for the holiday season, Jha said.
As the company turns its focus to more expensive phones Jha said he expects third quarter mobile phone revenue to be flat with the second quarter even though he sees phone unit sales declining in the quarter.
Motorola posted a profit of $26 million, or 1 cent per share, compared with a profit of $4 million, or break-even on a per-share basis, in the same quarter a year earlier.
Excluding unusual items, it would have posted a loss of 1 cent per share compared with the average analyst estimate for a loss of 4 cents a share, according to Reuters Estimates.
Revenue fell 32 percent to $5.5 billion, compared with analysts' average expectation for revenue of $5.6 billion, according to Reuters Estimates.
It set a target for the third quarter ranging from a loss of 1 cent per share from continuing operations to a profit of 1 cent a share, excluding any charges related to expense reduction moves or other unusual items.
McCourt said the outlook was in line with typical seasonal trends for the period.
You don't really know the answer on Motorola until the new handsets start selling. We're still a couple of quarters away from that, Morgan Keegan's McCourt said. All investors want from Motorola this year is to start generating a little cash, show revenue is stabilizing and start building good products.
Its shares rose 58 cents to $7.15 on New York Stock Exchange after falling 25 cents the day before. Motorola shares have more than doubled in price since early March on hopes that it was on the right track to revamp its mobile unit.
(Reporting by Sinead Carew; Editing by Derek Caney)