CHICAGO — Motorola Inc., which created and dominated the worldwide cell phone market, yesterday announced it may shed that business amid a decline in sales and mounting losses in the past year.

The move is an admission by Motorola of its inability to keep pace with fast-shifting consumer tastes. Twice in the past five years, Motorola chief executives have lost their jobs after failing to keep pace with changes in consumer demand. The announcement by the Schaumburg, Ill.-based company yesterday signals that new Chief Executive Greg Brown is determined not to become the third.

A turning point came in the past several weeks as early returns in the 2008 selling season showed Motorola cell phones couldn't match the technology-rich offerings from competitors, according to a source close to the company.

That forced Brown's hand, in part because of concerns that a further deterioration in Motorola's biggest business unit could harm the entire company, the source said.

The announcement stunned employees at the Libertyville, Ill., headquarters for Motorola's cell operation.

"It was like a punch in the gut," said one employee, who first heard the news from an overseas supplier.

Activist investor Carl Icahn, who owns nearly 3 percent of the company and has long pressed for a breakup, seized the moment yesterday to announce that he plans to propose a new slate of directors at Motorola's annual meeting in May. Icahn failed in a similar effort last year.

In announcing the move yesterday, Motorola said it is "exploring the structural and strategic realignment of its business to better equip its Mobile Devices business to recapture global market leadership and to enhance shareholder value."

While that may signal Motorola is putting its $19 billion cell phone unit on the block, the company also might instead sell one or both of its other major business lines — one for television set-top boxes and network equipment, and another that produces mobile equipment for governments and large businesses. It also could decide to keep the company intact.

"We don't want anyone to be misled that we've preordained" a plan, Don McLellan, Motorola's head of mergers and acquisitions, said. "This announcement is about equipping mobile devices with a way to achieve its leadership again."

Motorola's cell phones once dominated the worldwide market. But in the 1990s, Motorola lost share and ultimately conceded leadership to Nokia Inc. Despite a brief breakthrough with the Razr phone in 2004, in the fourth quarter of 2007 Motorola held a 12.2 percent market share, lagging Nokia's 40 percent and Samsung's 13.9 percent, according to research firm IDC.

The cell division lost $1.2 billion last year on $19 billion in sales. Total company revenues were $36.62 billion.

Motorola's stock is at 2003 levels, and it has lost nearly 60 percent of its value since the Razr brought the stock above $25 a share in the fall of 2006. Shares closed yesterday at $11.50, up 21 cents or 1.86 percent.

After hours, when the announcement was made, shares jumped almost 11 percent, to $12.75.