Cell-phone designer and mobile network equipment maker Motorola (NYSE:MOT) reports second-quarter earnings Thursday morning. For an early look at the report, dial 867-5309 or text "Fool" to *-ME-KITTEN. Or better yet, just skip the pop-music references and read on.

What analysts say:

  • Buy, sell, or waffle? Among the 36 analyst firms covering the mobile maven, 11 offer buy recommendations, 20 say hold, and five want you to sell. In Motley Fool CAPS, it's a two-star stock on more than 1,400 player ratings.
  • Revenues. Motorola lowered its earnings forecast last week and now aims for $8.6 billion to $8.7 billion in revenues. The average analyst forecast calls for $8.8 billion, adjusted down from $9.3 billion before that warning.
  • Earnings. Original net income guidance said $0.02 to $0.03 per share, but the new outlook is for breakeven to a $0.01-per-share profit. Wall Street wants that penny, as meager as it might look next to last year's $0.33 per share.

What management says:
So far this year, Motorola had axed about 11% of its staff, or 7,500 employees, in cost-cutting moves. Rumor has it that CEO Ed Zander may be the next man to become a head shorter, thanks to a disappointing string of results stretching back about a year.

What management does:
And you can see that unfortunate chain of events playing out in these numbers. With high and fixed operational costs, it doesn't take much of a gross-margin slip to have disastrous effects on the lower levels of the income statement.

Margins

12/05

4/06

7/06

9/06

12/06

3/07

Gross

32.5%

32.0%

31.5%

31.3%

29.8%

28.7%

Operating

12.0%

11.8%

11.7%

11.4%

10.3%

8.0%

Net

13.0%

12.3%

12.7%

10.3%

8.5%

6.5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Motorola can afford a couple of weak quarters, or even years, backed by its muscular balance sheet. This time, the downturn was wider than just Motorola -- almost the entire handset market went into a tailspin last year as consumers unexpectedly started to prefer low-end phones without the high-margin bells and whistles the manufacturers like to sell.

Some companies with die-hard fans seem immune to this effect -- I'm talking to you, Research In Motion (NASDAQ:RIMM) -- but even market leader Nokia (NYSE:NOK) took a margin hit, and the phenomenon filtered down to component makers such as Texas Instruments (NYSE:TXN) and assembly services such as Jabil Circuit (NYSE:JBL).

So is it unfair to pin the blame on Zander? Maybe not entirely. Motorola's troubles have ranked among the worst, and the company has failed to find a follow-on to the bona fide hit RAZR. Oh, those fickle consumers! And what now, with the Apple (NASDAQ:AAPL) iPhone looking to take away a largish chunk of the high-end handset market? Let's leave Motorola alone until it can stagger back up to its feet.

Follow the Foolish fate of Motorola and other telecoms in Motley Fool CAPS, where you can enter your own ratings for free.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is only a *69 away.