For the first quarter of 2007, Motorola's mobile handset sales were down 15% from the previous year, and incurred an operating loss of $231 million. This was in stark contrast to Sony Ericsson and Nokia, both of whom enjoyed considerable success with their range of handsets.

Internally, Motorola has been having a battle with carl icahn, who owns 3% of Motorola's stock, and who recently failed in his attempt to win a seat on the Board of Directors at Motorola. Icahn has pulled no punches in his criticism of Motorola's current management.

Against this backdrop comes the rumour of Ericsson buying Motorola.

The rumour comes from analyst Ed Snyder at Charter Equity Research, who has allegedly claimed that two of the main shareholders in Motorola told him that Carl Icahn has spread the rumours about this possible merger. And it's not like Icahn doesn't have his own agenda!