Updated from 7 a.m.

Motorola ( MOT) sank 11% early Friday after warning of a steep fourth-quarter earnings shortfall tied to weak sales of high-end handsets.

The Schaumburg, Ill., tech titan said it expects to make between 13 cents and 16 cents a share for the quarter ended Dec. 31, far short of the 39-cent Thomson Financial analysts' consensus estimate. The company said it expects to post revenue of around $11.7 billion, compared with a $12 billion Wall Street target.

"We are very disappointed with our fourth-quarter financial performance," said CEO Ed Zander, "but we remain committed to the strategic direction and long-term financial targets we discussed at our annual analysts meeting in July 2006. We will discuss plans to improve operating profitability on Jan. 19 when we announce fourth-quarter earnings."

Zander wasn't the only one disappointed by Motorola's performance. So was Wall Street, where analysts raced to slash their estimates and ratings on the company. Early Friday, CIBC cut the stock to sector perform from sector outperform, Piper Jaffray cut it to market perform from outperform and Deutsche Securities cut it to hold from buy. Credit Suisse cut rival Nokia ( NOK) to neutral from outperform.

Motorola said it expects the fourth-quarter bottom line to be hit to the tune of a dime a share by investment-related losses, stock compensation expenses, business reorganization charges and unusual tax expenses.

"The shortfall in both sales and earnings occurred in the Mobile Devices segment and is attributed to an unfavorable geographical and product-tier mix of sales as compared to the company's internal forecast," Motorola said. "In the fourth quarter, Mobile Devices unit sales were approximately 66 million units, up 23% from the third quarter of 2006 and up 48% from a year ago."

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