By Ville Heiskanen

(Bloomberg) — Motorola Inc., which plans to start selling new phones this quarter to return to profit and win back customers from Samsung Electronics Co., predicted a turnaround for its mobile-device unit in the second half.

The company, which today reported a second-quarter loss of $28 million, forecast results at its largest unit will improve this quarter and next. The shares climbed 1.2 percent.

Chief Executive Officer Ed Zander is betting on music and camera phones such as the Razr 2 to compete with Apple Inc.’s iPhone, which debuted June 29, and Samsung phones such as the BlackJack. Zander, who predicted the mobile-phone unit won’t be profitable this year, may have six months to revive the business or risk losing his job, said analysts including Jane Snorek.

“Their new devices are stylistically fine,” said Snorek, a Minneapolis-based analyst at First American Funds, which invests $55 billion and sold its Motorola stock three months ago. “They should be able to grow next quarter.”

First American may consider buying Motorola shares again once the company starts selling e-mail and music phones that consumers find easy to use, Snorek said.

The net loss was 1 cent a share, compared with a profit of $1.38 billion, or 55 cents, a year earlier. Sales fell 19 percent to $8.7 billion. Motorola first announced the loss last week, missing its forecasts for the third time this year.

Excluding costs for items such as job cuts, profit was 2 cents, exceeding the 1-cent average estimate in a Bloomberg survey.

Shares of Schaumburg, Illinois-based Motorola rose 22 cents to $18.22 at 4:02 p.m. in New York Stock Exchange composite trading. They have dropped 11 percent this year.

Forecast

Third-quarter profit probably will be 2 cents a share or “slightly” higher, when some costs are excluded, Motorola said. Analysts had estimated profit would be 5 cents. In the third quarter of last year, Motorola posted net income of $968 million, or 39 cents a share, on sales of $10.6 billion.

Brooklyn-born Zander, who earned his business degree by taking night courses, has endured criticism from investors such as billionaire Carl Icahn for failing to improve the phone business’s fortunes. Business Week reported today that the board is examining options for replacing Zander, including a promotion of Chief Operating Officer Greg Brown.

Motorola sold 35.5 million mobile phones in the quarter, down from 51.9 million a year earlier. Samsung, based in Suwon, South Korea, shipped 37.4 million phones in its latest quarter, pushing Motorola into third place in global sales. Nokia Oyj sells the most.

`Pressure’

Zander is “under a certain amount of pressure,” said Lucy MacDonald, who helps manage $100 billion as chief investment officer for global equities at RCM Ltd. in London. “With Apple appearing on the scene as well, that just increases the number of attractive options.”

Chief Financial Officer Thomas Meredith, who also is a director, said Motorola’s board supports Zander “100 percent.” He said he doesn’t know if the company has held discussions with candidates to replace Zander.

Zander has yet to introduce a phone to match the success of the best-selling Razr, unveiled in 2004 and now going for $20 with a service contract, less than a 10th its original price.

“I’m working really hard, guys, I really am,” Zander said in an interview today. “We’ve got to get mobile devices back. That’s all I’m focused on.”

The company in May unveiled the Razr 2, which is sleeker than its predecessor, has an improved camera and more storage for songs. Zander said the phone will start selling in the U.S. and Europe this quarter. Its Rizr Z8 “media monster” phone started selling in Europe last month.

Samsung’s Gains

Samsung has made strides with phones such as the BlackJack, which customers can use to download music from Napster Inc. and Yahoo! Inc. and to listen to XM Satellite Radio. AT&T Inc., the largest U.S. phone company, advertises the BlackJack with spots that focus on music and feature artists including the Pussycat Dolls.

Samsung and Nokia have won customers in Europe and Asia, while the iPhone has lured U.S. users, who account for more than a third of Motorola’s mobile-phone sales, according to Oppenheimer & Co. analyst Lawrence Harris.

“The iPhone is right now the phone of the moment,” said Harris, who is based in New York, rates Motorola “neutral” and doesn’t own it. “They need to get new products out on the market. Holiday selling season is just a few months away.”

The iPhone, priced at as much as $599, sold as many as 700,000 units in its debut weekend, according to New York-based Goldman Sachs Group Inc. analyst David Bailey, double his initial projections.

Revenue at Motorola’s handset unit fell 40 percent to $4.3 billion. The division had an operating loss of $332 million, compared with a profit of $804 million a year earlier.

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