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The agency has a "Baa2" rating on Motorola's senior unsecured debt, just two notches above speculative, or "junk" status.
Moody's said the review was based "on the company's prolonged decline in performance and uncertainty over how long it will take and how much it will cost to return the handset business to profitability."
But even if the company's debt is downgraded investors should not be too concerned as Motorola has enough cash on its balance sheet with no apparent need to raise new capital.
"Nobody likes this to happen but it would have practically no impact on the way Motorola would have to run the company or its ability to turn the cell phone business around," said JPMorgan analyst Ehud Gelblum.
Moody's said the Motorola's handset business, which has suffered market share losses for almost two years, is unlikely to recover in the near term while its other businesses are also facing pressure from the weak economy.
Moody's said its review will focus on Motorola's plan for restructuring its cell phone business, as well as liquidity and operating and non-operating sources of cash.
Motorola recently suspended a plan to spin off the company's handset business in the third quarter next year as it would take more time than expected to turn around the unit.
The company had cash balances of $7.6 billion as of Sept. 27, down about $1 billion from end-2007.
The company's shares closed up 16 cents or 4 percent at $4.27 on New York Stock Exchange Tuesday. The stock has lost more than 70 percent of its value since the end of last year.
A Motorola representative did not immediately comment on the Moody's review.
(Reporting by Ciara Linnane and Sinead Carew; Editing by Diane Craft)
((ciara.linnane@thomsonreuters.com; +1 646 223 6342; Reuters
Messaging: ciara.linnane.reuters.com@reuters.net) Keywords: MOTOROLA RATINGS/MOODY'S
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