Troubles continue at Motorola as the mobile phone maker admitted handset sales have plummeted by 39 per cent in the first quarter of the year.

The company, which has bent over backwards of late to appease activist investor Carl Icahn, also posted a $194 million (£98.4 million) loss, compared with $181 million for the same period last year. Its net sales fell to $7.45 billion from $9.43 billion.

Last month, the Illinois-based company agreed to float its mobile handset business following pressure from Mr Icahn, who owns 6.4 per cent of the company's stock.

The billionaire investor hopes the split, which will see Motorola’s networks business operate as a separate entity by 2009, will revive the company’s fortunes.

Motorola’s market share and stock price have tumbled over the past year after the group failed to produce another handset to match its best-selling Razr phone.

Today’s results extend a two-year slump and sent shares down 47 cents, or 4.92 per cent, to $9.08 in late morning trading in New York.

The group’s mobile handset unit lost $418 million during the quarter, almost 80 per cent more than last year’s $233 loss. Handset sales stood at $3.3 billion, or 27.4 million units, for the first quarter, a drop of 39 per cent.

Motorola also predicted a weaker second quarter than Wall Street was forecasting.

By comparison, its rival Nokia said last week it had boosted global handset sales by 27 per cent to a total of 115.5 million mobile phones, making up for a slowdown of sales in Europe and America with a strong presence in emerging markets.

The iPhone has also taken its toll on Motorola’s sales, with Apple reporting yesterday it had sold 1.7 million units in the first quarter.

However, other handset producers are struggling alongside Motorola as consumers feel the effects of the credit crunch.

Sony Ericsson said yesterday its sales had slumped 8 per cent, causing it to slip to fifth position in global market share behind South Korea’s LG Electronics.

Samsung, which stole Motorola’s number two spot in the market last year, is yet to report.

Analysts said revenue for all three of Motorola's business units - mobile devices, network equipment and enterprise mobility - fell short of expectations.

Operating profit for the group’s home and networks mobility division, which sells TV set-top boxes and modems, fell by 8 per cent to $153 million, while sales were up 2 per cent to $2.4 billion.

Bucking the trend, its enterprise mobility solutions division, which sells computing and communications equipment to businesses, saw a 9 per cent increase in operating profits, from $131 million in the first quarter 2007 to $250 million. Sales increased 5 per cent to $1.8 billion.

Shares in the group have fallen 65 per cent since October 2006, when investors started to become disillusioned with its results.

Meanwhile, LG today demonstrated it believes it is in a good position to weather the credit crunch by launching a new mobile phone for the premium handset market.

The so-called LG Secret is the third phone in LG’s Black Label. Its predecessors, the LG Chocolate and LG Shine models, have sold a total of 25 million units globally, helping the group shift 24.4 million handsets in the first quarter this year, an increase of 54 per cent on the same period last year.

Mr Chang Ma, vice president of marketing strategy, said he had “high expectations” for the touch-screen, slide phone and was confident it would do “a very good job in the market”.

The company has established a reputation for plush, design-led, high-tech phones, sealed by the launch of the Prada phone last March, co-branded with the fashion house.

Mr Ma said the company wanted to strengthen its position in the high-end segment before looking at the cheaper end. However he said the group was “preparing to go into other segments” if faced with a consumer slowdown. "If there has been a mistake on Sony Ericsson's part or Motorola, we will try not to repeat it," he said.