Nokia, Motorola win smartphone share; outlook weighs

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Nokia and Motorola Inc are regaining some market share in smartphones but while Nokia has profited from the gains, Motorola predicted a loss in the current quarter.

Shares in top phone maker Nokia posted their biggest one-day gain in nine months on Thursday after it reported earnings that beat estimates, while Motorola shares fell more than 12 percent on worries its turnaround will take too long.

Finland's Nokia and US-based Motorola dominated the mobile industry just a few years ago, but they have lost ground to Apple's iPhone and Blackberry-maker Research in Motion in the lucrative smartphone market.

Both firms have responded by shrinking their phone portfolios: Nokia has halved its smartphone launch plans for 2010, and Motorola co-chief executive Sanjay Jha is betting his company's future on smartphones based on Google Inc's Android software.

Motorola turned a small quarterly profit in the holiday shopping-fuelled fourth quarter versus a deep loss a year ago. Sales of 2 million smartphones helped, including its Droid phone, which was championed by top US mobile service Verizon Wireless.

But after Jha warned that smartphone sales would fall this quarter, some investors worried that Motorola's ascent in smartphones was slow alongside a sharper-than-expected drop in sales of cheaper feature phones, its biggest seller.

"Motorola is pointing to breakeven for its mobile devices division by the fourth quarter, but it won't be pretty getting there," RBC analyst Mark Sue said in a research note."

Jha said Motorola is spending a lot on developing new smartphones this quarter, a period that typically sees fewer phone sales than the busy fourth quarter.

As a result, Motorola forecast a first-quarter loss of 1 cent to 3 cents a share, missing analysts' average estimate of a 3-cent profit, according to Thomson Reuters I/B/E/S.

The weak outlook sent Motorola shares down 12 percent, while Nokia shares closed 9.9 percent higher at 9.91 euros in Helsinki -- its biggest one-day gain since April last year -- . Over the last 12 months, Motorola stock has gained 60 percent while Nokia has shed 6 percent.

"They almost have to do what Palm did 2 years ago -- a complete revamp of their portfolio," said Alan B. Lancz, president of wealth management firm Alan B. Lancz & Associates, which holds Nokia stock.

Still, Jha said he is forging ahead with plans to separate the phone unit from the rest of Motorola, emboldened by Droid's popularity and improving mobile market conditions.

Nokia said the cellphone market returned to growth in the quarter after a year of shrinking.

It said its market share in smartphones rose to 40 percent from 35 percent in the previous quarter.

Despite hype around Apple's iPhone, analysts said it was a clear market share loser among top vendors in the quarter. Its 8.7 million iPhone sales missed analysts forecasts. Shares in Apple fell 3.6 percent.