PREVIEW-Pressure mounts on Motorola as it loses share to LG

By Sinead Carew

NEW YORK, July 30 (Reuters) - Motorola Inc's (MOT.N: Quote, Profile, Research) expected drop to fourth place in the global phone market after LG Electronics Inc (066570.KS: Quote, Profile, Research) could put at risk the U.S. company's plans to spin off its loss-making handset unit.

Analysts, on average, forecast Motorola will report a second quarter net loss of about $124 million on Thursday, about four times wider than its year-ago loss.

Nine analysts surveyed by Reuters estimated Motorola sold 26.6 million handsets in the quarter, behind LG's 27.7 million, Samsung Electronics Co Ltd's (005930.KS: Quote, Profile, Research) 45.7 million and Nokia's (NOK1V.HE: Quote, Profile, Research) 122 million.

If Motorola, which is not expected to have major phone launches until 2009, does not make any commitments for improvement, investors will likely lose hope for a spin-off of the handset business next year, some analysts said.

"The handset business needs to achieve profitability before it can be spun off," said Kaufman Bros. analyst Raimundo Archibold. "Who's going to want to own a company that's bleeding money ... We need to gain some sense the losses can be tempered."

Archibold said Motorola's share price of about $7.40 shows a lack of investor confidence in its ability to fix its handset unit any time soon. Motorola shares have lost about 72 percent of their value since October 2006, when its financials started deteriorating.

Several analysts said Motorola risks missing their already low estimates because the company has probably lost a lot of share in the North American market, where it has long been the leader.

They said it was not clear if it had already ceded the U.S. lead or would do so in coming quarters, but noted that LG and Samsung both had strong product sales, as had Apple Inc's (AAPL.O: Quote, Profile, Research) iPhone. Nokia is also pushing to build up its U.S. business.