Google Slices Motorola Mobility Staff

by Peak Positions

Story first reported from WSJ.com

Google Inc. said Monday that it will reduce Motorola Mobility's workforce by about 20% to help streamline the unprofitable wireless-phone maker.

The roughly 4,000 job cuts are the first large-scale layoffs in Google's 13-year history. They are 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, and come as analysts speculate about whether Google is considering a spinoff of its home-television business that provides set-top boxes and other equipment to cable providers.

Google expects severance-related charges of as much as $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, possibly "significant" charges tied to the restructuring effort largely in the current quarter.

The company warned Monday that "investors should expect to see significant revenue variability for Motorola for several quarters," adding that it will likely take longer for Motorola to trim expenses than it will for the company's revenue to feel the impact from the latest cuts.

Niki Christoff, a Google spokeswoman, declined to elaborate on the restructuring effort beyond the company's latest statement in a filing with U.S. regulators. She added in a written statement that Motorola has a "vibrant Home business with good market leadership and a strong strategy."

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 intellectual property.

All of Motorola's new handsets use Google's Android mobile software.

Google said it plans to cull Motorola's product portfolio, which includes 27 different mobile phone models, to emphasize a smaller set of smartphones.

Motorola, which contributed about 10% of Google's second-quarter revenue, recently posted a $41 million operating loss in its mobile segment. The home business eked out a $3 million profit.

Two-thirds of the cuts in Motorola's mobile business will take place outside the U.S. The company also plans to close or consolidate about 30 of its 90 facilities. Motorola last month agreed to move the company's Libertyville, Ill., headquarters to downtown Chicago's Merchandise Mart building.

Investors reacted positively to the restructuring plan, along with an analyst's upgrade of Google's stock and a separate deal to buy John Wiley & Sons Inc.'s Frommer's travel brand. Shares in Google rose 2.8% to $660.01 on the Nasdaq Stock Exchange Monday. The stock is up 17% over the past 12 months.

"They're taking steps to make what has been an unprofitable unit for some time right-sized," RBC Capital Markets analyst Sean Kim said.

Morningstar analyst Rick Summer called the moves "quick" and "decisive" signs Google is committed to making the handset maker profitable, though one goal for Motorola—to drive the popularity of Android-based smartphones with cutting-edge hardware—could be an uphill effort. "It's not clear what Google and Motorola can do to push that market forward more than Samsung [Electronics Co.] already has," he said.

Morgan Stanley on Monday upgraded Google's stock to "overweight," highlighting the company's stable revenue growth and attractive valuation.

Fears of a messy Motorola integration were overplayed, the bank said, adding that reports of a possible spinoff of Motorola's home-equipment unit "reinforces our view that Google is indeed interested in [Motorola's] patents and smartphone hardware expertise, but is not seeking to overextend itself."

Analysts said the latest move wasn't unexpected. Google this spring hired Marsh & McLennan Cos. Chief Financial Officer Vanessa Wittman, who previously oversaw restructuring efforts at Seattle-based 360networks, to work at Motorola.

Former Motorola Chief Executive Sanjay Jha left when the deal closed, as did top executives Christy Wyatt, Bill Ogle, John Bucher and Juergen Stark, among others. New leaders include Motorola unit head Dennis Woodside and former Defense Advanced Research Projects Agency chief Regina Dugan, who joined Google in March and will lead an advanced technology group at Motorola.

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Google is One Step Closer With Motorola Mobility

First appeared in Associated Press

Google's $12.5 billion bid to buy cellphone maker Motorola Mobility has won approvals from U.S. and European antitrust regulators, moving Google a major step closer to completing the biggest deal in its 13-year history.

Monday's blessings mean Google Inc. just needs to clear regulatory hurdles in China, Taiwan and Israel before it can take control of Motorola Mobility Holdings Inc. and expand into manufacturing phones, tablet computers and other consumer devices for the first time.

Getting government approval in China looms as the biggest stumbling block remaining. Google's relationship with China's ruling party has been on shaky ground since the company blamed hackers in that country for breaking into its computers two years ago. The breach prompted Google to move its Internet search engine from mainland China in protest of laws requiring some results to be censored.

Google prizes Motorola Mobility's more than 17,000 patents - a crucial weapon in an intellectual arms race with Apple, Microsoft and other rivals maneuvering to gain more control over smartphones, tablets and other mobile devices. Google announced the deal six months ago.

The deal will "enhance competition and offer consumers faster innovation, greater choice and wonderful user experiences," Don Harrison, Google's deputy general counsel wrote in a blog post.

Besides signing off on the Motorola Mobility deal, the Justice Department also approved two other moves in the mobile patent battles. The approvals cover the $4.5 billion purchase of Nortel Networks patents by a group including Apple, Microsoft and BlackBerry maker Research in Motion Ltd. and a separate Apple acquisition of Novell Inc. patents.

The Justice Department ended its investigations after concluding the new patent owners won't try to drive up the prices of competing mobile devices by demanding exorbitant licensing fees. The agency said it was particularly concerned about key patents held by Motorola Mobility and Nortel.

Apple Inc. and Microsoft promised to license the Nortel patents on reasonable terms while Google's commitments on the Motorola Mobility patents were "more ambiguous," according to a statement from the Justice Department's antitrust division.

Nevertheless, the Justice Department didn't find any evidence that Google's ownership of Motorola Mobility would lessen competition in a mobile device market that is becoming increasingly important as more people connect to the Internet on smartphones and tablet computers instead of desktop and laptop computers.

In granting its approval, the European Union also raised concerns about Motorola's aggressive enforcement of its patents. EU Competition Commissioner Joaquin Almunia said regulators will "keep a close eye on the behavior of all market players in the sector, particularly the increasingly strategic use of patents."

In its statement, the Justice Department also vowed to crack down on any sign that mobile patents are being used to throttle competition. Microsoft said it was encouraged by the regulatory commitments.

Other key concerns centered on Google's Android operating system, free software that now powers more than 250 million mobile devices made by a variety of manufacturers, including Motorola Mobility. Competition could be hurt if Google gives Motorola Mobility the most advanced versions of Android or withholds the mobile software from other cellphone makers.

Google, though, has pledged to make Android available to all its mobile partners. Even if Google were to discriminate, cellphone makers still could rely on mobile software from Microsoft Corp., Research in Motion and Hewlett-Packard Co., among others.

The European regulators see no danger that Google will prevent other device makers from using its popular Android operating system after the takeover.

"Android helps to drive the spread of Google's other services," the Commission said. "Given that Google's core business model is to push its online and mobile services and software to the widest possible audience, it is unlikely that Google would restrict the use of Android solely to Motorola," which only has a small market share in Europe.

The government reviews in U.S. and Europe have come as regulators also have been conducting a broader inquiry into whether Google has been abusing its dominance in Internet search to hobble its rivals. Those investigations are still ongoing.

Assuming Google eventually takes over Motorola Mobility, the union will open new opportunities and pose potentially troublesome challenges for a management team that so far has concentrated on Internet search, ad sales and other software-driven online services.

Motorola Mobility's expertise in mobile devices and set-top boxes for cable TV will allow Google to play an even more influential role in shaping the future of hand-held computing and home entertainment. Even as it navigates the regulatory gauntlet, Google has begun testing a device for connecting electronic components within homes, according to a filing with the Federal Communications Commission.

Absorbing Motorola Mobility also threatens to crimp Google's earnings growth and drag down its stock price. That's because Motorola Mobility has been struggling on its own as Apple's iPhone and other smartphones made by rivals such as Samsung Electronics undercut sales of its products. Google SEO is curious what the change could bring.

Google is making a huge bet that Motorola Mobility can do better. The $12.5 billion price is more than the combined amount that Google has paid for the 185 other acquisitions that it has completed since going public in 2004.

Google's stock rose $6.29, or 1 percent, to close Monday at $612.20. Motorola Mobility's gained 18 cents to $39.63, just below the proposed sale price of $40 per share. Google is based in Mountain View, California, while Motorola Mobility has its headquarters in Libertyville, Illinois.