Motorola posted a third-quarter loss Thursday as it announced a major software overhaul in its mobile device  division and a postponement of a planned split of the company due to ongoing problems in the financial markets.

The Schaumburg, Illinois, handset maker posted a net loss of $397 million, or $0.18 a share, in the quarter compared with net income of $60 million, or $0.03 a share, a year ago. Revenue fell 15 percent to $7.48 billion.

Motorola shares declined $0.37, or 7 percent, at  $5.09 in midday trading.

The company's Mobile Devices unit hit the skids in the quarter. Motorola reported sales of $3.1 billion for the division, a 31 percent drop from the same period a year ago. The unit reported an operating loss of $840 million compared with a $248 million loss a year ago.

A number of analysts expected significant job cuts, but the company only said that it will cut up to $800 million in annual costs.

A big chunk of those cuts are related to its decision to focus its handset software operations on Android and Windows Mobile. Some of the cuts will undoubtedly come from its Symbian and Linux operating systems businesses.

Co-CEO Sanjay Jha said on the company's conference call that the focus on Android and Windows Mobile will leave Motorola with a massive portfolio hole in the middle and low end of the consumer market.

Both Android and Windows Mobile require sophisticated hardware, so they are locked in at the high end of the consumer and business smartphone markets, respectively.

“We are focusing our resources where we think we have the best product portfolio and brand recognition for Motorola,” he said. “In the first half of 2009 our ability to address the smartphone segment market will be more limited.”

In the long term Mr. Jha expects Motorola’s ability to address a wider sweep of market segments will improve. But Motorola’s profitability will still improve in large part because of the cost cuts, he told analysts.

“In 2009 the work we are doing and the work being done by partners, including Google, I think will expand our footprint from high tier to high end medium tier,” he said. “And we plan a large number of devices addressing a number of price points in the market using both Android and Windows Mobile.”

Mr. Jha expects both Android and Windows Mobile to address the midtier and possibly the low end by 2010.

He said Motorola was forced to postpone a planned split of the company from the third quarter 2009 to an unannounced later date because of “stresses in the financial markets.”