Updated from 12:56 p.m. ET

Motorola's

(MOT)

woes continue.

In what sounds like the refrain to a really bad song, the world's second-largest maker of cell phone handsets

warned on Friday that it will miss its first-quarter sales and earnings targets -- and perhaps even post a loss -- because customers aren't placing as many orders as expected, especially in the company's key personal communications and semiconductor businesses.

Spooked investors sent the company's shares down $1.04, or 6%, to $16.25 Friday.

Motorola certainly suffers from its own special brand of problems, but its tribulations also bode ill for rivals in the handset-manufacturing industry as the prospects for growth falter in the wake of a maturing European market and a slower-than-expected upgrade to enhanced wireless networks. Even market leader, and once seemingly invincible,

Nokia

(NOK) - Get Report

is feeling the slowdown, so much so that investors

are fretting over whether it'll issue its own warning.

Opening the Window

So throw those earnings expectations of 12 cents a share and revenue expectations of $8.8 billion for Motorola out the window. And you can blame the "sharp economic slowdown occurring in the United States" and the "inventory corrections taking place broadly in technology markets worldwide," like Motorola did.

Or you can look at a new and discouraging handset environment, one where a great deal of consumers, especially in Europe, already own handsets and have little interest in upgrading, or replacing, those phones until the promise of retrieving high-speed data on better phones kicks in. During the question-and-answer session of its conference call Friday morning, Bob Growney, Motorola's president and chief operating officer, took down the Schaumburg, Ill.-based company's estimates for industry-wide handset sales in 2001, not once but twice, within the space of just a few minutes.

Ed Gams, Motorola's director of investor relations, attributed order shortfalls in the company's personal communications sector, which includes the cell phone business, to weak carriers in Europe. Burdened by huge debts from buying up spectrum, the carriers are also beginning to reduce subsidies for handsets. (A subsidy is a sales incentive that allows a carrier to take on part or all of the cost of a cell phone, instead of making the customer pay for the whole thing.) Those reductions result in higher prices, which discourage people from buying phones, especially in a market where 73% of Italians and 59% of Germans already own phones.

As a result, Growney acknowledged in one breath that sales of handsets across the industry could go lower than 525 million units this year. And then in another breath, he reduced that number further to below 500 million. Those figures are in stark contrast to the company's projection just six-and-a-half weeks ago of the low end of a 525 million to 575 million range.

Across the Industry

"Without any question, it's an industry thing," says David Katz, chief investment officer of the

Matrix Advisors Value Fund

. (His fund has a position in the company.) "Is Motorola at the top of its game? No." But he points out that Motorola isn't the first company to blame the economic slowdown for its troubles.

This increasing pessimism among investors in cell-phone makers also is hitting one-time shining star Nokia, which got hammered Thursday on rumors of a profit warning. Todd Bernier, an analyst with

Morningstar.com

, says he wouldn't be surprised if Nokia did issue a warning in light of the deteriorating handset environment. Nokia fell $1.91, or 8.2%, to $21.34 a share Friday.

"Everyone is lowering their guidance," Katz notes. "It would be unexpected if everyone doesn't do the same. Even

EMC

(EMC)

, which was invincible,

lowered its guidance."

Of course, Motorola has problems of its own. Bernier says that he finds it strange that "seven weeks into the first quarter, all this stuff is suddenly coming up. I have a hard time believing that the economy has deteriorated that much in just a couple of weeks." (He doesn't rate stocks and his firm doesn't participate in underwriting.)

Unlike Nokia, Motorola has been a serial warner. For the

fourth quarter alone, the company issued two separate warnings that the numbers would come in below expectations. And its operating profit margins -- 2.2% in the fourth quarter, far short of the company's 10% goal at the beginning of 2000 -- are consistently below Nokia's.

Weak Demand

"What's really driving this is Motorola's product portfolio," says Bryan Prohm, an analyst with research firm

Dataquest

. He adds, "There's not a lot of demand for Motorola products. The area they've been successful in is higher-priced products, while the market is skewed greatly to the low end."

In an effort to wring substantial profits from its businesses, including handsets, Motorola has announced the closing of six plants, with four more in the pipeline and another three under consideration, according to Growney.

Motorola also is troubled by market share losses. Growney declared that Motorola increased its market share by a "modest amount" in the fourth quarter, dismissing figures from Dataquest that signaled a drop of 1.4 percentage point in the company's worldwide share, to 12.7%. He added, "There is no sense that we are giving up market share in the current first quarter."

Prohm defends the numbers, saying that Dataquest tracks actual sales to end users, not shipments to distributors, with the former coming in lower than the latter. "Even though shipments were substantially higher, a lot of volume is still in the channels," he explains. He also says Mike Zafirovski, president of Motorola's personal communications sector, called Prohm's boss to object to the Dataquest figures.

And you knew tensions were running high even before the conference call began on Friday morning, as an unidentified individual used blue language to object to the presence of a shareholder with only 1,000 shares on the call. A Motorola spokesman says no one from the company was involved in the brief outburst.