Tumbling mobile phone sales and prices have taken their toll on Motorola, which slipped to a $181 million (£91m) loss in the first quarter.

The group’s first quarterly loss since mid-2004 compared with a $686 million profit for the same period a year ago. Revenues at the world’s second-largest mobile phone maker fell 2 per cent to $9.43 billion.

The figures matched expectations after Motorola issued its latest warning over profits in March - its second in six months.

Sales from the core mobile devices division dropped 15 per cent to $5.4 billion amid an ongoing fierce price battle in the sector. Shipments of 45.4 million handsets were down 31 per cent from the final three months of 2006.

The company forecast a small profit, excluding exceptional items, for the second quarter, but added that sales are expected to fall by about 14 per cent, leading analysts to comment the outlook was bleaker than they had expected.

Analysts have said that Motorola faces an uphill struggle to rebuild its business as it struggles to replace its successful Razr model to compete in the West's saturated markets.

The group has been criticised for failing to penetrate the market for cheaper phones while falling behind in the race to develop sophisticated handsets.

Ed Zander, the Motorola chief executive, said: “The performance in our mobile devices business in the first quarter is unacceptable and we are committed to restoring it to an appropriate level of profitability.”

The group has parted company with both its chief financial officer and the head of its handset unit in recent months after a string of profits warnings. In a bid to slash costs and boost margins it has unveiled plans to cut 3,500 jobs, or about 5 per cent of its work force.

Motorola has also become locked in a proxy fight with Carl Icahn, the billionaire investor, who owns about three per cent of the company. Mr Icahn announced in January that he wants to be elected to one of 13 seats on its board and has been pressing the company to use more of its $11 billion cash-pile to expand its share buy-back scheme.

In response, Motorola has said it thinks Mr Icahn is unqualified for the post.

Shares in the group rose 14 cents to $18.08 in opening deals on the New York Stock Exchange. The stock has lost about 15 per cent this year.

Nokia, the largest mobile maker, is also expected to announce a fall in profits when it reports first-quarter results tomorrow. Analysts forecast a 5.5 per cent fall in pre-profits to about €1.365 bilion (£925m). Revenues are seen growing about 7 per cent to about €10 billion, driven by strong growth in India and China.

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