Slashes a fifth of Motorola Mobility workforce. Google's Android hardware partners must watch and wait on any forthcoming Motorola products.
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Google in a financial filing Monday revealed that it plans to cut 20% of the workforce at its Motorola Mobility subsidiary--4,000 jobs out of 20,000--in an effort to restore the mobile hardware company to profitability.
Google announced plans to acquire Motorola Mobility in August 2011 for $12.5 billion and the deal was approved by U.S. and E.U. regulators in February 2012. Google CEO Larry Page characterized the acquisition as a way to strengthen Google's patent portfolio, "which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple, and other companies."
Page also suggested that Motorola Mobility would continue to be a leading Android hardware maker, though he and other Google executives have been vague about the hardware that Motorola Mobility would be called on to make. It's now clear that Motorola Mobility's contributions to the Android hardware ecosystem will diminish.
Two-thirds of the layoffs are slated for outside the U.S. and the company also plans to shut down about one-third of its 90 facilities in order to simplify its product line and de-emphasize feature phones--low-end mobile phones--in favor of smartphones and other more profitable devices.
"While Motorola expects this strategy to create new opportunities and help return its mobile devices unit to profitability, it understands how hard these changes will be for the employees concerned," a company spokeswoman said in an emailed statement. "Motorola is committed to helping them through this difficult transition and will be providing generous severance packages, as well as outplacement services to help people find new jobs."
In its 8-K filing, Google stated that its expects to incur up to $275 million in severance-related costs in the third and fourth quarters of 2012, along with additional restructuring charges, mainly recognized in the third quarter. The filing also noted that Motorola Mobility lost money in 14 of its last 16 quarters.
Google has yet to prove that it can compete as a maker of consumer electronics devices. It began selling the HTC-designed Nexus One online in January 2010 then stopped six months later, the result of poor sales. Its Google TV effort has struggled to gain traction, thanks to software released too early, lack of support from major content providers, and hardware like the Logitech Revue that was priced too high. And the company's first-home grown hardware, the Nexus Q streaming media player, was recently postponed indefinitely following poor reviews and complaints about the device's high price.
But all is not lost: The Asus-made, Google-branded Nexus 7 tablet has been widely praised and is selling well. The question is what Motorola Mobility, after the layoffs, will be able to bring to the table and how any forthcoming Motorola products might affect the decisions of Google's Android hardware partners.
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