Motorola Inc posted a bigger quarterly profit in the second quarter as it cut costs and shipped more cell phones than expected, sending its shares up 7.6 percent.

Motorola, which trails rivals Nokia and Samsung Electronics <005930.KS>, shipped 14.8 million phones in the quarter, down from 28 million phones a year earlier but higher than the average forecast of 14.1 million from five analysts contacted by Reuters.

It looks like it was a decent quarter, said Morgan Keegan analyst Tavis McCourt, adding that Motorola's phone sales were helped by subscriber growth at Sprint Nextel Corp's Boost Mobile unit, which offered an unlimited calling plan.

The company, which has steadily lost market share to rivals in the last few years, has been weeding out unprofitable phone lines and is betting its recovery on smartphones based on Google Inc's Android software.

Motorola raised its 2009 cost savings target to $1.8 billion from $1.7 billion and cut 8,000 jobs in the first half of the year.

Sanjay Jha, co-chief executive and head of the mobile business, said the company has agreements in place with carriers and is on track to bring new devices to the market for the holiday shopping season.

You don't really know the answer on Motorola until the new handsets start selling. We're still a couple of quarters away from that, Morgan Keegan's McCourt said. All investors want from Motorola this year is to start generating a little cash, show revenue is stabilizing and start building good products.

Motorola posted a profit of $26 million, or 1 cent per share, compared with a profit of $4 million and break-even on a per-share basis in the same quarter a year earlier.

Excluding unusual items, it would have posted a loss of 1 cent per share compared with the average analyst estimate for a loss of 4 cents a share, according to Reuters Estimates.

Revenue fell 32 percent to $5.5 billion, compared with analysts' average expectation for revenue of $5.6 billion, according to Reuters Estimates.

Motorola said its cash position rose $360 million to $6.5 billion in the second quarter. In comparison, investors had taken fright in April when Motorola said its cash had fallen $1.3 billion to $6.1 billion in the first quarter.

It set a target for the third quarter ranging from a loss of 1 cent per share from continuing operations to a profit of 1 cent a share, excluding any charges related to expense reduction moves or other unusual items.

McCourt said the outlook was in line with typical seasonal trends for the period.

Motorola shares rose to $7.07 in early trade on Thursday after closing at $6.57 on the New York Stock Exchange on Wednesday.

(Reporting by Sinead Carew; Editing by Derek Caney)

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