Google reported today in a government filing that it plans to cut 4,000 jobs, or about 20% of Motorola Mobility’s workforce in an attempt to streamline operations and “shifting the emphasis from feature phones to more innovative and profitable devices.”
The company, which acquired Motorola Mobility earlier this year for $12.5 billion, noted in a Securities and Exchange Commission filing that two-thirds of the job cuts would impact operations outside the United States. The Chicago Tribune reported that the handset maker would cut about 700 jobs in the Chicago area, or about 23% of its workforce, leaving approximately 2,300 employees in the area. That move could set up a battle with the local government as Motorola Mobility had previously agreed to keep at least 2,500 jobs in the area in return for tax credits.
“These changes are designed to return Motorola’s mobile devices unit to profitability, after it lost money in fourteen of the last sixteen quarters,” Google noted in the SEC filing. “That said, investors should expect to see significant revenue variability for Motorola for several quarters. While lower expenses are likely to lag the immediate negative impact to revenue, Google sees these actions as a key step for Motorola to achieve sustainable profitability.”
Motorola Mobility posted an $86 million loss during the first quarter of this year, which followed several quarters of losses ahead of Google’s acquisition.
Canaccord Genuity noted in a report that Motorola Mobility was No. 5 in domestic handset sales during the second quarter, tied with LG and Sony Ericsson at 4% of the market.
Google added that it would provide “generous severance packages” as well as outplacement services for those impacted by the cuts. The move is also expected to result in a $275 million severance-related charge during the third quarter.
Google’s acquisition of Motorola Mobility was somewhat controversial as the Internet search giant has made a name for itself in the mobile space by offering its Android operating system to just about all device makers and deployment through most wireless operators. The company has had a particularly close relationship with Samsung, which has manufactured a number of Google’s “halo” Nexus devices that are designed to show off the latest and un-modified version of the Android OS.
Many noted that the deal to acquire Motorola Mobility was mostly centered on picking up essential intellectual property and patents that Google will need to further its mobile ambitions.
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