Motorola, the phone manufacturer, issued its second profits warning in six months, saying that it was feeling the effects of a decision to focus on increasing profit margins rather than building market share.

The company said it would report a loss in the first quarter and also lowered earnings predictions for the full year, after it failed to penetrate the market for cheaper phones and also fell behind in the race to develop sophisticated handsets.

Motorola said it expected a first-quarter loss of up to 9 cents a share - analysts had predicted earnings of 17 cents - and that its mobile device division, which accounts for more than half of its business, would also incur a loss.

Sales for the quarter would be in the range of $9.2 billion (£4.7 billion) to $9.3 billion, the company said - more than a billion dollars less than it forecast in January, and profitability and operating cashflow would be “substantially below prior guidance”. Motorola shares were down 6.5 per cent to $17.52 in afternoon trading.

Ed Zander, chief executive, said the lower sales volumes were a result of the decision to focus on growing margins, which meant that the company had not matched the price reductions of its competitors.

“This is a fast business, very fast - and we didn’t react fast enough,” Mr Zander said, adding that the company had failed to follow up on its hugely popular Razr phone.

“We got away from what made us successful in 2004 and 2005,” he said. “You get an appetite for market share. But you have to make sure you have the underpinnings and cost structure to go after it.”

Mr Zander dismissed speculation that his own job was under threat, however. “Right now, I’m focusing on the new team,” he said. “Today, this is about execution in the mobile-device area. It’s been more challenging than we initially thought.”

Carl Icahn, an activist investor with a 2 per cent stake, has been pressing the company to use more of its $11 billion cash-pile to expand its share buy-back scheme, which Motorola said yesterday it would accelerate. There was also speculation that the company would buy Palm but Mr Zander declined to comment.

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