Oct. 24 (Bloomberg) -- Motorola Inc. Chief Executive Officer Ed Zander may have bought more time for a turnaround after firing 10 percent of his workforce and introducing a successor to the Razr handset.

Motorola, the biggest mobile-phone maker in the U.S., probably will report its first profit in three quarters tomorrow after losing $209 million in the first half. The Schaumburg, Illinois-based company earned $49.9 million, or 3 cents a share, in the third quarter, down 95 percent from a year earlier, according to a Bloomberg survey of analysts.

A return to profitability may give Zander another nine months to show he can produce a successful handset line to go with the cost cuts, said Tony Carbone, an analyst at RCM Capital Management in San Francisco. Investor Carl Icahn wants Zander's resignation if the phone unit doesn't recover by year's end.

``They're putting a tourniquet on the wound by cutting expenses,'' said Carbone, whose firm oversees $100 billion including Motorola shares. ``The longer-lasting solution of new products takes hold by the middle of next year.''

The analyst survey forecasts that sales dropped 17 percent to $8.85 billion, a 1.3 percent gain from the second quarter. In July, the company reported a second-quarter loss of $28 million as sales fell 19 percent to $8.7 billion.

The company reports earnings tomorrow morning before trading begins in New York. Motorola spokeswoman Jennifer Erickson declined to comment.

Margin Improves

Third-quarter gross margin probably widened to 29.5 percent, said Oppenheimer & Co. analyst Lawrence Harris in New York. The margin shrank to 28.1 percent in the second quarter and averaged 32 percent in the past five years, according to data compiled by Bloomberg.

The shares have gained 16 percent since reaching a two-year low in August. Five analysts raised their ratings on the stock in the past three months. Of the 37 who cover Motorola, 15 recommend buying the stock, 19 say ``hold'' and three recommend selling, according to data compiled by Bloomberg.

The stock, down 9.8 percent this year, fell 40 cents to $18.55 at 4:26 p.m. in New York Stock Exchange composite trading.

Motorola's market share dropped to 14 percent in the second quarter from 22 percent a year earlier, according to data compiled by Bloomberg. Apple Inc.'s iPhone and new BlackBerrys from Research In Motion Ltd. won over U.S. consumers, while Nokia Oyj and Samsung Electronics Co. took sales from Motorola outside the U.S.

$250 Razr

Zander, 60, cut about 5,100 jobs in the first nine months of 2007, out of a planned 7,500 this year. In May, he introduced the Razr 2, which is two millimeters (1/10th of an inch) thinner than the original Razr and has a bigger screen and more storage for music.

The $250 phone, an update of the three-year-old Razr that sold more than 100 million units, is receiving ``solid'' demand, Lehman Brothers analyst Jeff Kvaal wrote in an Oct. 4 note. He raised his price estimate 10 percent to $22, after upgrading the stock to ``overweight'' from ``equal weight'' in August.

``It certainly will do better during the holiday season,'' said Barry Gilbert, a vice president at Strategy Analytics, a market research firm in Boston. ``Much depends on the price point and whether $250 is too much.''

Since the new Razr's debut, the number of U.S. consumers who say they would consider buying a Motorola handset increased for the first time this year, according to quarterly data from market researcher ChangeWave in Rockville, Maryland. About 15 percent of people planning to buy a phone say they will get a Motorola, up from 14 percent in July, ChangeWave said last week.

Paralysis Over

In March, Zander promoted Greg Brown, head of the networks and enterprise business, to be president. Former Dell Inc. executive Thomas Meredith was hired as finance chief. Stu Reed, who oversaw Motorola's supply chain, became head of the mobile- phone unit in July.

Motorola is ``no longer in a period of paralysis,'' CIBC World Markets analyst Ittai Kidron wrote in an Oct. 7 note. He rates the stock ``sector outperform.''

The mobile-phone unit probably still had a loss in the third quarter, said Maynard Um, an analyst at UBS AG in New York. Motorola needs to keep adding more attractive phones with e-mail and music and can't rely solely on the Razr 2, he said.

``The iPhone does a lot more -- it's also your iPod, and the BlackBerry does e-mail,'' Um said. ``The question is, what is the compelling reason to buy the Motorola versus the iPhone or the BlackBerry?'' He rates the stock ``neutral.''

Icahn, who plans to add to his 3 percent stake if the shares decline, said Zander's future depends on an earnings improvement.

``That's a question now for the board,'' Icahn, 71, said in an interview on Oct. 11. ``We'll know when we see if the numbers are coming in.''

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

Last Updated: October 24, 2007 16:41 EDT