Muddy Trails for Motorola

The news comes as Motorola CEO Ed Zander comes under fire from activist investor Carl Icahn, who said Friday that he now holds a 2.8% stake in the company. Icahn is strongly pushing for a place on the board and a chance to hold management accountable for the deteriorating business.

Icahn changed his call for a big dividend to a call for an immediate fix to what he called "operational failures."

Motorola has tumbled for the past year as its once-hot Razr phone fell out of fashion. And as luck would have it, none of the new designs have caught on with similar intensity. To make it worse, Motorola ran into snags with its new Scpl platform that was to be the basis for a whole family of slim, inexpensive phones.

But taking the long view, some analysts see the possibility for a bit of a reprieve.

"We believe fundamentals, and the stock, could begin to trend back up again in the back half of the year as the business gets rescaled and the company launches newer handset models," J.P. Morgan analyst Ehud Gelblum wrote in a research note.

Demand for mobile phones is still strong and the sales are growing at an annual clip of 10% to 15%, according to analysts and industry executives. Phone rivals like No. 1 Nokia (NOK Quote) and chipmakers like Qualcomm (QCOM Quote) are flourishing amid the spread of wireless calling worldwide.

But Motorola will continue to sit on the sidelines until it delivers phones that really grab the consumer, says Merrill Lynch analyst Tal Liani in a note last week.

"Given the poor handset portfolio, we see little upside potential in the stock until the company refreshes its portfolio," Liani writes. "In our view, past experience suggests that it would be more prudent to wait for hard evidence of such success rather than speculate on its timing."