Posted 29 August 2012
Layoffs expected as Google aims to streamline unprofitable business
Google Inc. (GOOG) recently said it will reduce Motorola Mobility's work force by about 20% to help streamline the money-losing wireless phone maker.
The cuts, aimed at returning Motorola's once-dominant mobile devices unit to profitability after the business spent 14 of the past 16 quarters in the red, comes as analysts speculate Google also is considering a spinoff of its home TV business, which mostly provides set-top boxes and other equipment to cable providers. The company sees severance-related charges of up to $275 million, most of which will be booked in the third quarter. The remaining severance-related costs will be recognized by the end of 2012. Google also expects to record other significant charges tied to the restructuring effort in the current quarter.
Google warned that "investors should expect to see significant revenue variability for Motorola for several quarters" and that it expected to incur more restructuring charges, which "could be significant." It added that while lower expenses are likely to lag the immediate negative impact to revenue, it sees these actions as a key step for Motorola to achieve sustainable profitability.
Google in May bought Motorola Mobility through a $12.5 billion deal that armed it with thousands of patents, which have become increasingly valuable as technology companies trade lawsuits over their intellectual property. All of Motorola's new handsets use Google's Android mobile software. Google previously said it planned to cull the array of devices Motorola offers to emphasize a smaller number of smartphones.
Investors reacted positively to the news, pushing Google's stock up 1.1% to $649.12. The stock has climbed 15% over the past 12 months.