Motorola Inc said its second-quarter loss will narrow after first quarter results came in stronger than expected thanks to deep cost cuts, sending shares up 1 percent.

While revenue in the first quarter missed Wall Street expectations, the cell phone maker outlined plans to expand existing cost cutting measures, resulting in positive free cash flow for the second half of the year.

Avian Securities analyst Matthew Thornton said investors will react well to Motorola's success at curbing costs, even though the weak economy appeared to hurt demand for phones.

The question is can we continue to see the light at the end of the tunnel after this report. We're getting incrementally closer, he said, but added that Motorola's business beyond cell phones -- home and networks and enterprise mobility -- performed worse than expected.

Revenue was below expectations primarily due to the other businesses, Thornton said. Even though handsets might be seeing some light at the end of the tunnel, the other businesses are being affected by the macroeconomic conditions.

Motorola, which has struggled in recent years to stem sharp market share declines, posted a first quarter loss of $231 million, or 10 cents per share, compared with a loss of $194 million, or 9 cents per share in the same quarter a year ago.

Excluding some charges, the loss per share was 8 cents, better than the average analyst forecast for a loss of 11 cents, according to Reuters Estimates.

Revenue fell 28 percent to $5.37 billion, below the average Wall Street estimate of $5.55 billion.

Motorola, whose biggest competitors are Nokia and Samsung Electronics <005930.KS>, sold 14.7 million phones in the quarter, down from 27.4 million a year ago. Cell phone revenue fell 15 percent to $1.8 billion.

The company forecast a second quarter loss per share from continuing operations in a range of 3 cents to 5 cents.

Analysts on average had forecast a loss of 4 cents per share for the second quarter, according to Reuters Estimates.

Motorola said it was increasing its cost savings target for 2009 by $200 million to $1.7 billion, including $1.3 billion in savings from the cell phone unit.

Through improvements to its bottom line and working capital, the company expects to generate positive cash flow in the second half of the year.

Motorola's mobile devices unit saw its loss widen to $509 million from $418 million in the year earlier quarter, but improve from a loss of $595 million in the fourth quarter 2008.

Its shares rose 1 percent to $6.03 in premarket trading.

(Reporting by Sinead Carew; Editing by Derek Caney and Tiffany Wu)

Electronics Motorola