Motorola, the struggling mobile phone maker, said yesterday that it was considering demerging the handset unit from its other businesses to halt a sharp decline in sales.

The shares shot up 10 per cent in after-hours trading on hopes that the group will either sell off or float its mobile phone arm after losing market share for more than a year. The share price is down 28 per cent since the new year and down 56 per cent since its peak in October 2006.

Such a demerger would leave Motorola with a home and networks arm that sells broadband, set-top boxes and communications hardware to companies.

In a statement after the market closed yesterday, Motorola said that separating the mobile arm would “permit each business to grow and better serve its customers”.

In November, Ed Zander, the joint chairman and chief executive, said that he would relinquish both of his roles within six months after the handset maker announced a 94 per cent fall in quarterly profits. He stood down as chief executive in January and will resign as chairman at the annual meeting in May. Pressure on Mr Zander intensified at the start of 2007, when he managed to fight off the billionaire corporate raider Carl Icahn, who wanted a change of management at Motorola.

The company started running into trouble two years ago when it lost market share to Nokia and Samsung, the now bigger mobile phone handset makers. Motorola admitted that it had tried to maintain its market share by cutting prices, which had hit profitability.

Elsewhere, Google, the world’s biggest internet company, startled Wall Street last night with disappointing quarterly profits and aggressive spending plans, sending its shares down 8 per cent in after-hours trading. Google said that it expected to continue to make “significant capital expenditures” after spending $678 million (£340.6 million) in the fourth quarter on new data centres, servers and other equipment.

Google is perceived as being particularly vulnerable to a slow-down because it generates almost half its revenue from advertising.

Net income during the fourth quarter rose to $1.21 billion from $1.03 billion for the same period the year before. Revenue jumped 51 per cent to $4.83 billion. Wall Street had expected up to $5.1 billion.

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