Motorola's U.S. Mobile Phone Sales Plummet

The good news for Motorola: The iconic technology company is still the top seller of cell phones in the United States. The bad news: Motorola's lead is slipping fast.

In the second quarter, Motorola captured almost 26 percent of the U.S. market, maintaining its longtime perch at the top of U.S. handset makers, according to a report issued Aug. 11 by Strategy Analytics. But sales by Motorola declined more than 10 percent from a year ago and opened the door for LG Electronics to close to second in U.S. handset sales at 21 percent.

Following Motorola and LG were Samsung (18.6 percent), Research in Motion (10.6 percent) and Nokia (9.5 percent). For RIM, the Q2 report was especially heartening as the BlackBerry maker cracked double figures in U.S. market share for the first time. According to Strategy Analytics, RIM saw the largest growth of any mobile phone maker for the quarter.

"RIM is the real story," analyst Bonny Joy at Strategy Analytics told reporters. His report added, "RIM…is seeing huge success with its balanced consumer and enterprise portfolio." RIM is also likely to see another bump in sales with the introduction of its 3G BlackBerry Bold, which began rolling out in Austria and Germany Aug. 7.

Overall, U.S. handset sales continued to defy the slowing economy, as sales climbed 5.3 percent year-over-year to 42 million. Joy credited the handset makers' success with attractive bundles and the release of new models for the increase.

Motorola enjoyed few benefits of the overall bump, although Strategy Analytics Director Neil Mawston said, "Motorola had a good quarter and retained its No. 1 position in the U.S.A., with a 25.8 percent market share."

Mawston said what success Motorola gained in the second quarter could be attributed to Motorola's "strong distribution network and deep carrier-relationships" in both GSM and CDMA markets." He added, "Motorola is not yet out of the woods, but these are encouraging, early signs of stabilization."

Motorola has been feeling pressure from billionaire investor Carl Icahn to sell off its struggling cell phone division. Once the global No. 2 cell phone maker behind Nokia, Motorola has fallen to third and is dangerously close to tumbling to fourth.

Motorola CEO Greg Brown first mentioned spinning off the handset unit shortly after taking over for former CEO Ed Zander in January. In March, Brown said Motorola was launching a process to create two independent, publicly traded companies. To avoid a proxy fight with Icahn, Motorola's single-largest shareholder, the company agreed to seat two Icahn associates on the board and to seek input from Icahn about the future of Motorola's mobile phone division.

Last month, Motorola announced its Home & Networks Mobility unit, the company's second-largest division after the cell phone business, will be split into three units: television set-top boxes and modems; carrier-class wireless equipment; and next-generation wireless equipment, including WiMax and LTE.

The flagging cell phone handset division won't face a spinoff for another year, according to published reports.