A collapse in mobile handset sales has forced Motorola to reduce its payroll by cutting 4,000 jobs, the second round of redundancies since October, when it shed 3,000 staff.

Motorola ranks second in the US in handset sales but the group's share of the market is falling.

During the critical Christmas gift season it suffered a sales collapse. The company said this morning that it shipped 19 million units in the fourth quarter of 2008 compared with 25 million in the third quarter and half the volumes shipped in the final quarter of 2007.

The job cuts are intended to save the company an $700 million (£480 million) in overheads this year and is in addition to $800 million cost cuts already announced from the round of redundancies signalled in the autumn.

Sanjay Jha, co-chief executive of Motorola, said that the initiatives would enable its mobile devices business to reduce its cost structure and lead to better financial performance with annual cost savings of $1.2 billion in 2009.

"Additionally, we are making good progress in developing important new smartphones for 2009 and are pleased with the positive resonse from our customers to these new devices," he said.

Motorola blamed weakness in consumer demand and customer destocking for the weak fourth quarter shipments, but the downturn in the holiday season stunned some industry analysts.

"It's not supposed to happen that way," said Pablo Pérez-Fernández, of Global Crown Capital.

Motorola's position in mobile handsets has declined sharply since 2006, when it was the biggest US supplier and global No 2 after Nokia.

The company is losing business to rivals and is fighting for fourth place in the global rankings.

Times Recommends

• ‘Lame duck’ fear for FSA as chief quits
• Storm over bailout of EU's most ailing economy
• Northern Rock to drop 100% savings guarantee