Handset sales are picking up

The world's second biggest mobile phone maker reported surprisingly strong demand for its handsets in the most recent quarter.

It also forecast stronger-than-expected sales in the current quarter and said profits could top analysts' estimates.

The upbeat results took US investors by surprise, sparking a rally across the whole technology sector.

Demand soars

Motorola - which has been struggling to restructure amid falling demand for its products and tough competition from Nokia and Samsung - saw its shares rise 2.2% to $14.10, a 14-month high.

The tax and low interest rate economic stimulus appears to be enhancing the prospect for slow but emerging growth Christopher Galvin, Motorola chief executive

Motorola's results echo upbeat figures from Germany's Siemens, which last week said it saw a 44% increase in handset sales in the most recent quarter.

Samsung has also said it will be raising its outlook for the mobile handsets market as demand far outstrips supply and stock levels reach their lowest in half a decade.

The South Korean mobile phone maker - the third largest in terms of units sold - is due to report third-quarter earnings later this week.

New models

Samsung mobile's vice president of sales and marketing, Chang Soo Choi, said: "We had a very good quarter. There is more demand than we can supply."

A new range of colour screen handsets with built-in cameras and other options from almost all handset makers had turned the usually slow third quarter into an outstanding period, he said.

Motorola, which moved up its reporting date by a day because of a downgrade of its debt late on Friday, reported a third-quarter net profit of $116m (�70m), or five cents a share.

That compares with a profit of $111m, or five cents a share, in the same quarter a year earlier.

Sales for the quarter rose almost 5% to $6.83bn from $6.53bn a year ago.

Spin-off

Analysts on average had expected Motorola to earn three cents a share, excluding one-time items, on sales of $6.44bn, according to Reuters Research.

"The overall business environment seems to have stabilized and the tax and low interest rate economic stimulus appears to be enhancing the prospect for slow but emerging growth," Motorola chairman and chief executive Christopher Galvin said in a statement.

Mr Galvin said last month he was resigning after clashes with the board over strategy, but will remain until a successor is named.

Earlier this month, Motorola said it was planning to spin-off its loss-making semi-conductor division, a move long-sought by the markets.

'Disappointed'

But some analysts remained sceptical about Motorola's latest forecasts.

"This is the same company that reported strong (mobile-phone order) numbers on the surface last year this time and then managed to come out about a quarter later and say there was too much inventory," said Alex Vallecillo, senior portfolio manager of Armada Funds.

"Guys like me are probably going to take a little bit of a wait-and-see attitude."

Brian Modoff, of Deutsche Bank Securities, was disappointed with the outlook.

"It's not great. You'd think they'd be a little more positive given the orders."