Oct. 25 (Bloomberg) -- Motorola Inc., the largest U.S. maker of mobile phones, posted its first profit in three quarters and gave a forecast that surpassed analysts' estimates after eliminating more than 5,000 jobs and unveiling a new version of the Razr phone.

The earnings surprise helped Motorola rally the most in nine months in New York trading.

Third-quarter net income amounted to $60 million, compared with losses of $209 million in the past two quarters. Excluding costs for job cuts, profit was 6 cents a share, topping the 4- cent average of estimates compiled by Bloomberg.

The results may lend Chief Executive Officer Ed Zander ammunition in his fight with investor Carl Icahn, who threatened to seek the executive's resignation unless he stemmed a sales decline caused by Nokia Oyj's market share gains. Motorola sold almost 1 million copies of the Razr 2 even with fresh competition from Apple Inc.'s iPhone.

``Zander is now going to be granted another chance,'' said Matthew Kelmon, a fund manager at Kelmoore Investment Co. in San Francisco, who doubled his Motorola stake to 200,000 shares in August. ``They're still under the gun, but they're responding to the pressure.''

The company, based in Schaumburg, Illinois, forecast fourth- quarter profit of 12 cents to 14 cents a share, which beat the 11-cent analyst average.

Motorola rose 75 cents, or 4 percent, to $19.30 at 4:01 p.m. in New York Stock Exchange composite trading, the largest gain since January.

Stock Gains

Sales slumped 17 percent to $8.81 billion, compared with the $8.85 billion average of estimates compiled by Bloomberg. Profit dropped 94 percent to 3 cents a share from $968 million, or 39 cents, a year earlier.

Billionaire Icahn, who holds about 3 percent of Motorola, had urged the company to reduce costs to improve the business. The investor had said he would call for Zander's dismissal by the end of the year if he failed to revive the phone unit. He didn't return calls seeking comment today.

Zander, 60, has sought to squeeze profit out of dwindling sales by slashing the workforce by more than 10 percent. He earned his business degree through night courses and served as chief operating officer at Sun Microsystems Inc. before beating out former Motorola executive Mike Zafirovski for the top job.

The company brought Zander in at the start of 2004 to revive a once-dominant business, taken down by larger Nokia. The all- metal Razr came out months after he took over and has since sold more than 110 million units, more than any other Motorola product.

Fading Prestige

Since then the phone's prestige has faded, leaving the Brooklyn, New York-born engineer struggling to find a device to match its success. He has since cut costs to keep profits, and got rid of 5,100 jobs in the first nine months of 2007, out of a planned 7,500 this year.

Today's results ``definitely bought him some time,'' said Mike Blatt, who helps manage about $2 billion, including Motorola shares, at Chemung Canal Trust Co. in Elmira, New York. ``If they would have missed again this quarter, I think he would have been forced out.''

Gross margin, or what's left of sales after production costs are deducted, widened to 28.4 percent from 28.1 percent in the previous quarter. The margin was 31.8 percent in the year-earlier period, and has averaged 32 percent in the past five years, according to data compiled by Bloomberg.

Profit at the division making wireless networks and TV set- top boxes fell 29 percent to $165 million. The loss for Motorola's mobile-phone unit shrank to $138 million, excluding costs for job cuts, almost half as much as the previous quarter.

`Good Start'

Mobile-phone shipments rose 4.8 percent from the second quarter as Motorola shipped 900,000 Razr 2s. The $250 phone, which made its U.S. debut in August, is thinner than the original, has a bigger screen and more storage for music.

``The Razr 2 is off to a good start,'' Oppenheimer & Co.'s Lawrence Harris said in an interview. ``The loss in the mobile- phone business was reduced significantly. Over time, we will see more improvement.'' The New York-based analyst raised his rating for the stock to ``buy'' from ``neutral'' and doesn't own it.

Motorola also started selling the Q9, which comes with a full keyboard and resembles Research In Motion Ltd.'s BlackBerry phone, for $249.99 through Verizon Wireless.

The new devices helped Motorola increase its average selling price ``slightly'' to $121 in the quarter, Chief Operating Officer Greg Brown said on a conference call. He said the phone unit's sales and ``bottom line'' will improve this quarter, without specifying whether the division will post a profit.

Share Slumps

Some investors say it's too early to buy Motorola shares since the mobile-phone unit is still losing money and customers. Gramercy Capital Management President Joan Lappin, who called for Zander's resignation earlier this year, still says the company would benefit from a leadership change.

``All that has happened is there's less blood coming out of the corpse than there was six months ago,'' said Lappin, who is based in New York. ``I don't see anyone at the top of that company that has what they need.''

The company's share of mobile-phone sales slumped to 13 percent in the third quarter from 22 percent a year earlier, according to data compiled by Bloomberg. The iPhone and BlackBerrys won over subscribers at carriers such as AT&T Inc., the largest operator in the U.S., while Nokia Oyj and Samsung Electronics Co. took sales from Motorola outside the U.S.

Research In Motion added 1.45 million subscribers in its latest period. In its most recent quarter, Apple, which introduced the iPhone in June, sold 1.1 million units, making the phone the top seller for AT&T.

``We have to do a better job at AT&T,'' Zander said in an interview today. ``We're motivated to get this thing to where it should be.''

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

Last Updated: October 25, 2007 16:17 EDT