Google (GOOG) will lay off 4,000 Motorola employees, or 20 percent of the mobile-maker's workforce, as the Internet giant reinvents and transforms the Motorola mobile devices unit into a profitable and thriving business. Two-thirds of the job cuts will occur overseas and Google will shutter about one-third of Motorola's worldwide offices.
Google announced its $12.5 billion cash offer for Motorola Mobility last August and completed the deal in May. At the time Google co-founder and CEO Larry Page described the purchase as a move that would "enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies."
According to the Aug. 3 filing Google submitted to the SEC, Motorola's device unit has lost money in 14 of the last 16 quarters but "investors should expect to see significant revenue variability for Motorola for several quarters" and "Google sees these actions as a key step for Motorola to achieve sustainable profitability."
The upcoming job cuts will affect all levels of Motorola employees. The New York Times reports that 40 percent of Motorola's vice presidents will be shown the door and Motorola's offices in Asia and India will be drastically downsized. Google also plans to limit the number of mobile devices Motorola currently makes, from about 27 models to just a "limited few" and end production of lower-priced models.
Motorola, the first company to commercially sell a cell phone in 1973, has seen the popularity of its devices wane over the past few years. Apple's (AAPL) iPhone and Samsung's Galaxy smartphone have eaten away at Motorola's market share, who was once hailed as the market's leading innovator for its sleek and then cutting edge Razr phone design.
Motorola, like its mobile device competitors, already uses Google's Android operating system. Google's control over Motorola could influence future Motorola products but Motorola's new chief executive Dennis Woodside told The New York Times that Motorola would "compete equally" with other manufactures and would not have any advantages or a leg-up in the global market.
Google's purchase of Motorola gives it access to Motorola's 17,000 patents — an enormous cache of data that could provide the technology and edge Google seeks in the crowded and competitive mobile market.
"The only way this will work long term is if Google and Motorola start producing phones that people want more than an iPhone," Blodget adds.