updated 1/23/2008 9:10:28 AM ET 2008-01-23T14:10:28

Cell phone maker Motorola Inc. said Wednesday its net profits fell 84 percent in the fourth quarter and warned that the recovery in its struggling handset unit will take longer than expected.

Its shares dropped more than 17 percent in premarket trading.

New CEO Greg Brown, who took over this month after Ed Zander resigned following four rollercoaster years, portrayed a longer turnaround than Wall Street had expected and bluntly acknowledged that what the No. 3 cell-phone maker is doing isn’t working. He said global market share — already down to 13 percent last year from 23 percent at the end of 2006 — is continuing to decline.

“Demand for some of our products has slowed in an intensified competitive landscape,” he said on a conference call. “Our consistency of new product introduction is still not where it needs to be. And we still have gaps in the portfolio in areas that are experiencing high rates of growth, including 3G (third-generation), China and other emerging markets.”

The $100 million profit was its first quarterly gain since the first quarter, but small by Motorola’s historical standards. The net income amounted to 4 cents per share and was down from a year-earlier profit of $623 million, or 25 cents per share. Sales fell to $9.65 billion from $11.79 billion a year earlier.

Income from continuing operations was 5 cents per share, including charges of 9 cents per share for asset write-downs, layoffs and a legal settlement. That was 8 cents less than the consensus estimate of analysts polled by Thomson Financial.

Motorola executives had told analysts that a series of innovative new cell phones would help break the company out of its slump. The Schaumburg, Ill.-based company showed tentative progress toward a turnaround in the third quarter during a disastrous year which saw its handset sales tumble 33 percent overall from 2006.

But sales from the mobile devices division, dominated by cell phones, sank 38 percent to $4.8 billion in the fourth quarter as the company failed to connect with consumers over the holidays. The handset unit, its biggest, had an operating loss of $388 million and shipped 40.9 million devices during the quarter, in line with analyst expectations but down sharply from past quarters.

Motorola’s other businesses fared better. The home and networks segment, which sells TV set-top boxes and modems, saw sales rise 11 percent to $2.7 billion although operating earnings decreased 14 percent to $192 million. The enterprise mobility solutions unit, which sells computing and communications equipment to businesses, registered a 40 percent increase in operating earnings to $451 million on $2.1 billion in sales, up 35 percent from a year ago due largely to the acquisition of the Symbol business in early 2007.

The company forecast a first-quarter loss from continuing operations of 5 cents to 7 cents per share, below the analysts’ consensus estimate of 10 cents per share.

Separately, Motorola announced it will put Qualcomm Inc. chipsets into some of its handsets starting at the end of the year. Terms were not disclosed.

Motorola will put the chipsets into some of its third-generation handsets that offer voice, text and other features.

San Diego-based Qualcomm is the world’s second-largest supplier of mobile phone chips and licenses its technology to other handset makers.

For 2007, Motorola had a net loss of $49 million, or 2 cents per share, compared with a profit a year earlier of $3.67 billion, or $1.46 per share. Revenue declined 15 percent to $36.6 billion from $42.8 billion.

Motorola shares were down $2.12, or 17.2 percent, to $10.20 in premarket trading. The stock is trading at its lowest level since 2004.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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