Updated from 2:40 p.m. EST



is still hurting, and the tech titan may be looking to spread its pain to partners like


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Investors will tune in Tuesday before the bell -- when Motorola reports earnings -- to hear a strategy update from handset chief and co-CEO Sanjay Jha, who was brought in last year to save the phone business.

Two potential moves might give Motorola more breathing room, but the effort will not put suppliers like Qualcomm and Microsoft at ease.

It was a joyless year in Schaumburg, Ill. Not only did Motorola's sales drop 18%, but the former phone giant also managed to fall from No. 2 to the back of the pack behind Nokia, Samsung, LG and Sony Ericsson.

With no wildly popular phones in production, Motorola's shrinkage continues. Last month, the company


that in the fourth quarter it swung to a 6-cent-a-share adjusted loss on $7.1 billion in sales. Executives brandished the ax for the second time in three months and announced plans to cut an additional 4,000 workers, taking the total cut target to 7,000.

Competition is heating up in the smartphone market. Not only is



showing signs of renewal with its Pre touch-screen phone, and


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getting closer to a much-anticipated

debut in smartphones

. Meanwhile,


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is expected to introduce more versions of the iPhone. And

Research In Motion


continues to make a good stand with its new devices.

Fighting for its survival, Motorola has some hard decisions to make.

One possibility: In light of



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new favorable deal over licensing fees and royalties with Qualcomm, Motorola may look to strike its own lower rate.

"We suspect Motorola is renegotiating its royalty agreement -- an amazing two years or more before its current contract actually expires," JPMorgan analyst Ehud Gelblum wrote in a Qualcomm research note.

Motorola declined to comment on possible Qualcomm negotiations. Qualcomm, on its earnings call last month, declined to identify which of its manufacturing partners it was negotiating with.

For Qualcomm investors, the concern is that Nokia's terms could spread to other players and cut into its 3G royalty rate revenue.

Another troubling sign for a tech partner was the

report Friday

in the

South Florida Business Journal

that Motorola was firing 77 workers and will no longer conduct new Microsoft Windows mobile development at its Plantation, Fla. facility.

Smartphones are the biggest growing segment of the mobile-phone sector, and Motorola has already

shown signs

that it is moving toward


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Android operating system.

Motorola says nothing has changed. "We continue to focus on Windows Mobile as one of our software platforms," the company said in a statement Monday.

That could change, however, as Motorola retrenches, leaving Microsoft vulnerable at a tough time.

Microsoft's grip on the smartphone industry could start slipping as Apple's iPhone takes off and Research In Motion continues to grow its niche.

Motorola shares closed up 2.5% to $4.54 in trading Monday.