Motorola (NYSE: MOT) reported second quarter earnings today that managed to beat expectations. The troubled handset maker posted a Q2 profit of $4 million, on $0.00 per share, compared with a loss of $28 million, or 1 cent a share, in the same period a year ago. Sales, meanwhile, were down to $8.1 billion from $8.7 billion year on year. It could have been worse; according to a Bloomberg poll of analysts, Motorola was expected to post profits of $7.7 billion. Handset sales were also a surprise. While sales were down 22 percent compared to a year-ago quarter at $3.3 billion, Motorola managed to ship better than expected numbers, shifting 28.1 million units in the quarter, while analysts had expected the figure to dip as low as 26.1 million units (which leaves Moto still scraping into third place, a few hundred thousand above LG). The unit also reported an operating loss of $346 million, compared to an operating loss of $332 million in the year-ago quarter. The good news is that Motorola retains its number three spot in global market share, the bad news, is that LG (SEO: 066570) isn’t that far behind, having shipped 27.7 million units in Q2.

In comparison, its other divisions did better, with the Home and Networks Mobility unit posting sales of $2.7 billion, up 7 percent from $2.564 from the same quarter a year ago. Enterprise Mobility Solutions sales grew 6 percent to $2 billion, up from $1.9 billion year on year.

Conference call highlights after the jump...

Conference Call Highlights:

Mobile Devices: North America remains Moto’s largest market, accounting for 48 percent of sales, followed by Latin America, making up 27 percent sales. Remainder of sales comes from rest of the world combined. Top sellers include 12 million units of W Series phones, 3 million Razrs, over 1 million Rokrs, and over 1 million Razr 2s. Touchscreen Ming series in China doing well. Plans to launch more handsets in second quarter to bring total handsets rolled out to 50 this year, up 40 from last year. Expects pipeline output to continue to grow. Expecting sales to be down in third quarter sequentially. But expects higher margin.

Handset Market Outlook: Still expect 10 percent unit growth in 2008. Thought North American demand showed resiliency in Q2, where it increased market share.

Mobile Device Unit Guidance: Q3, guiding down sequentially, with improvement in operating loss compared to the last quarter. Total Available Market (TAM) of 317 million, up from 295 million in Q2. TAM to grow sequentially. Most will come from Asia/ EMEA in Q3, where the portfolio is currently challenged. Expect North America and Latin American sales to remain strong. Q2 was strong in North America—boosted by W755 at Verizon.

Spinoff: Expects to complete the spinoff of its handset unit in the third quarter of 2009. What are the benefits given how difficult it is to hive off unit? Mobile industry has changed, mobile devices market has changed, faster, more software oriented, more experience driven. Can compete more effectively, can attract world-class CEO, better management. (CEO search going well, keep you posted). How do you plan to fund handset unit (given that most handset manufacturers are part of bigger businesses)? Too early to say but, will unlock value for shareholders.

Brand: No decisions on brand—which division will get it.

Smartphones, Internet Services: Plans to increase smartphones, including Qwerty devices, as well as Touch. From a stickiness standpoint, acquired online music store Soundbuzz in Asia, which is doing well. Plans to evaluate more of these types of opportunities, that is services that phones can use.

ASP: Slight decline in Q2 to $218.

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