Motorola Mobility warned that its fourth quarter 2011 results have been “impacted by the increased competitive environment in the Mobile Device business,” and that its costs have also been impacted by “ongoing Intellectual Property litigations.”

The recovering handset vendor, which is in the process of a takeover by Google, forecast sales of US$3.4 billion for the quarter, with “modest profitability on a non-GAAP basis.” According to Forbes, analysts had anticipated revenue would be closer to US$3.9 billion.

The company also said it estimates shipments of 10.5 million mobile devices, of which approximately 5.3 million were smartphones. This compares poorly with the prior quarter, especially since Q4 contained the lucrative Christmas holiday sales period – in Q3, Motorola shipped 11.6 million devices, including 4.8 million smartphones.

While Motorola is growing its smartphone business, this is not offsetting declines in its feature phone line. The company is also facing tough competition from rival Android device markers, with HTC also suffering to this end – although smartphone market leader Samsung currently seems to be immune.

Motorola also has a number of lawsuits active, including actions involving Microsoft and Apple. The company’s intellectual property portfolio was a key asset which led Google to make a US$12.5 billion offer for the company, in order to help with other legal actions related to the Android platform.

The handset maker said that it “continues to work closely with Google to complete the proposed acquisition of Motorola Mobility as expeditiously as possible.” However, it also noted that the transaction is subject to various closing conditions, and that there is the possibility that circumstances “could delay or prevent completion of the transaction altogether.” It is still hopeful the deal will close "in early 2012."

Motorola will announce its fourth quarter results on 26 January 2012.