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Motorola continues to bleed amid rotten economy

Even as it takes steps to reduce costs, the company reports heavy losses for the first quarter of 2009 as demand for its handsets weakens.

Motorola continued to lose money during the first quarter of 2009 as shipments for wireless handsets declined amid the ailing economy.

The company was already in pretty bad shape when the global economy started to tank last year. And since then, things have continued to get worse. Without any cool new handsets and with dropping demand from customers, Motorola's troubled handset business continues to drag the company down.

During the first quarter, which ended April 4, Motorola reported that shipments of cell phones fell about 46 percent to 14.7 million compared with the same quarter a year before. And shipments were down about 23 percent compared to the fourth quarter of 2008. The mobile-devices division's operating loss widened to $509 million as sales for the unit dropped about 45 percent to $1.8 billion. But the loss was an improvement over the $595 million the division lost in the fourth quarter of 2008.

Motorola's two other major divisions, home networking and emergency response communications, helped buoy the company's overall earnings. But even these divisions were hit by the dragging economy in the first quarter. As a result, Motorola reported a net loss of $231 million, or 10 cents a share. In the year-ago period, the company reported a loss of $194 million, or 9 cents a share. Revenue was down about 28 percent to $5.37 billion compared with $7.45 billion a year ago.

Motorola has been taking a series of steps to reduce costs. It has suspended its dividend, and it's cut about 6 percent of its workforce. The company also set aside plans to spin off the handset business because at this point it can't survive on its own.

The company's executives have said that the cost cuts are making a difference. And the company has predicted that it will lose only between 3 cents and 5 cents per share, adjusted for onetime items, in the second quarter of 2009. It expects to be generating cash in the second half of the year.

Currently, Motorola has about $6.1 billion in cash, down from $7.4 billion at the end of 2008.