Motorola, the mobile phone company, has reported a return to profit for the three months to June, despite a 10% fall in sales.

The group - the world's second largest mobile phone maker - blamed a number of reasons, including the outbreak of the Sars virus and the closure of its factory in Japan, for the poor sales.

It also warned of continued weakness in the second half of the year.

But it said its ability to make a profit despite the downturn in sales was a sign of success.

"(It) is evidence of the progress the company has made in improving its cost structure," said the group chief operating officer Mike Zafirovski.

Tough year ahead

Motorola warned in June that its profits were being hit by the Sars virus and a stockpiling of handsets in Asia.

A robust inclination for global business to invest is unlikely to return until there is some reduction in the number of unsettling issues Christopher Galvin, Motorola CEO

An earthquake in May also damaged the company's semiconductor plant at Sendai in Japan, temporarily disrupting manufacturing.

But the group reported a net profit of $119m for the second quarter of the year, compared with a loss of $2.3bn in the same period a year ago.

Sales, however, slipped from to $6.2bn from $6.7bn last year, below analysts' expectations of about $6.5bn.

Motorola said it expected the rest of the year to grow only slowly, predicting revenue of $6.3bn-$6.5bn in the current three months.

Chief executive Christopher Galvin said:

"A robust inclination for global business to invest is unlikely to return until there is some reduction in the number of unsettling issues facing decision makers."

In the three months to June, mobile phone sales were down 13% while the wireless networking division suffered a 17% drop in sales.