Motorola Mobility, which split off from parent company Motorola on January 4 to become a separately traded entity, reported a fourth-quarter net profit of $80 million compared with a loss of $204 million a year ago.
Fourth-quarter revenue increased 21.3 per cent to $3.4 billion.
It was the second consecutive quarterly profit for the Illinois-based Motorola Mobility after years of losses but the company said it expected to post a loss in the current quarter of between $26 million and $62 million.
The gloomy forecast and competition from the iPhone at Motorola Mobility partner Verizon Wireless combined to send shares in the company down 7.55 per cent to $32.20 in after-hours electronic trading.
Motorola Mobility said it shipped 4.9 million smartphones in the quarter, up from two million a year ago and 3.8 million last quarter.
But Motorola Mobility chairman and chief executive Sanjay Jha said there had been "a little slowdown" in sales since the announcement Verizon Wireless would begin selling the iPhone next month, ending AT&T's monopoly over the device.
Jha, who has tied the company's fortunes to Google's Android mobile operating system, expressed confidence in the future of the company.
"The improvement in our financial results last year, including profitability in the fourth quarter, is indicative of the progress we have made in delivering innovative smartphones and improving the Mobile Devices business," he said.
"With the global opportunities ahead, along with our diversified portfolio, our brand, and our people, we are well positioned to grow, and further improve our financial results in 2011," Jha said.
Jha said that Motorola's answer to the iPad, an Android-based tablet called Xoom, which was crowned the best new gadget at the Consumer Electronics Show (CES) earlier this month, would go on sale in February.
Motorola Mobility also said it expects to sell between 20 million and 23 million smartphones and tablet computers this year.