Google is starting the process of remaking Motorola, the device manufacturer it bought for $12.5 billion, by slimming it down with a 20 percent cut of its global workforce, or 4,000 jobs. The reduction, part of a larger restructuring that will include the closure of 1/3 of Motorola’s more than 90 global offices, is part of an effort to make Motorola more competitive with smartphone leaders Apple and Samsung, according to a story first reported in the New York Times.
The cost of the cuts, according to an SEC filing, will not exceed $275 million this year. About a third of the job losses will take place in the U.S. The move is not entirely unexpected considering the mounting losses at Motorola — its phone business has been unprofitable 14 of the last 16 quarters. And considering at least a portion of the $12.5 billion acquisition was about Motorola’s 17,000 patents, Google was expected at some point to cut into Motorola’s workforce.
In the most recent quarter, the first after Google acquired it, Motorola generated $1.25 billion in revenue for Google. In its last four quarters before the acquisition was finalized in May, Motorola shipped 19.6 million smartphones. Rival Samsung was believed to have shipped more than 40 million smartphones in just the first quarter of 2012 alone.
According to the Times, Motorola is introducing a more DARPA-like development process with a new advanced technology group, whose employees will sign on for just two years at a time. Motorola will also streamline the number of components and suppliers it uses. And it’s reducing the number of lower priced cell phones it manufacturers with an eye toward making more high-end profitable devices. Operations will be reduced in Asia and India with research and development centered in Chicago, Sunnyvale and Beijing.
Google will still face challenges in turning around Motorola and in showing its Android manufacturing partners that it’s not giving Motorola preferential treatment. It will need to churn out some winning devices to justify the Motorola purchase, but if it’s too successful, it may raise the ire of Android manufacturers. And with Samsung such a dominant Android manufacturer, Google can’t afford to upset the Korean giant. That could make Motorola a permanently under utilized asset for Google.
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