Motorola (NYSE: MOT) reported a fourth quarter loss of $3.6 billion, or $1.57 a share, hit by falling sales, particularly in its mobile handset unit. Sales dropped 26 percent, sinking to $7.1 billion, and missing analyst expectations of $7.2 billion. Mobile Devices saw sales drop to $2.35 billion, a 51 percent decline compared to the same period last year. The operating loss was $595 million, compared to an operating loss of $388 million in the year-ago quarter. The struggling handset maker shipped 19.2 million handsets in the quarter, which it estimated gave it a 6.5 percent of the global market. It blamed the unit’s poor performance on the weakening economy and on “gaps in its portfolio.” Motorola also said it was suspending its dividend, and was embarking on a cost savings plan that aimed to save $1.5 billion in 2009. In another blow, Paul Liska, its chief financial officer, is leaving the company. SVP and corporate controller Edward J. Fitzpatrick has been named acting CFO until Motorola can find a replacement.

Other Earnings Highlights:

— Home and Networks Mobility: Sales were down 5 percent to $2.6 billion, compared with the year-ago quarter. Operating earnings increased to $257 million, compared with operating earnings of $192 million in the year-ago quarter.

— Enterprise Mobility Solutions: Sales were up $2.2 billion, compared with the year-ago quarter. Operating earnings increased to $466 million, compared with operating earnings of $451 million in the year-ago quarter.

Conference Call Highlights:

— Sanjay Jha, co-CEO, says company will narrow its portfolio to focus on mid to high-tier devices that deliver data functionality—given that this is driving operator revenues right now.

— How to differentiate an Android-based Moto phone given number of competitors? Attracted to Android despite competition because got great deal of traction, see lots of applications being written for it, OS is built from the ground up with mobile internet in mind. Moto advantages—have worked in Linux Java which is what Android is based on, has a large team familiar with it. Says it also plans on delivering compelling experiences, applications, especially in social networking. Spent significant amount of resources to deliver tightly integrated experience in social networking. Also working on other experiences to differentiate itself. “We have world-class design team that delivered the Razr.” Added that it is working very closely with Google (NSDQ: GOOG). Has a large team, some of which are located in Google offices. Tight integration will become a key differentiator.

— Windows Mobile still a go? Yes, we are still committed to Windows Mobile. We believe Android is more competitive in 2009, but when Windows 7 comes out in 2010, Windows will be more competitive. Placing focus on Android until Windows 7 comes out.

— Spin-Off still in works? This is still the plan of record, says co-CEO Greg Brown. But unrealistic given financial environment and mobile unit’s current position. Jha adds that three things are important: market conditions, access to makertplace for capital, and status of mobile devices. “As these things improve, we remain committed and will move forward on the separation. Brown: “[The separation] is not a 2009 event. We have to get mobile devices back to a position to separate.”

—Considering exiting handset business at all? Market saying you can’t fix it, have you considered exiting the handset business and how much that would cost? Jha reiterates commitment to unit.“We are completely committed to making the handset business work, this is shared throughout organization. Think the path we are on is right path.”

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