Google May Slough Off Big Chunk of Motorola Workforce
Aug 13, 2012 11:57 AM PT
For employees at Motorola Mobility, there were probably better ways to start the business week. On Monday, Google announced that it was cutting about 4,000 jobs at its mobile phone business division, and that it will close or consolidate about one-third of its 90 locations around the world.
This represents about 20 percent of Motorola Mobility's 20,000 employees and 7 percent of Google's total workforce. About two-thirds of the job cuts will occur outside of the United States, according to reports. These cuts come three months after Google purchased Motorola for US$12.5 billion.
"This likely includes a redundancy with Google's programming staff," said Chris Silva, industry analyst for mobile at Altimeter Group.
This likely won't be the final round of cuts either, especially as Motorola is far from the top mobile phone maker these days. Google's acquisition of Motorola was likely because of Motorola's past achievements, rather than its current condition.
The acquisition amounted to a "vote of confidence" in Motorola's patent portfolio, Silva told the E-Commerce Times. "This was an intellectual property buy more than anything else."
Google did not respond to our request for further details.
Given the redundancy, as well as the fact that Motorola had lost much of its luster with consumers by the time it was acquired, these cuts are far from surprising. In fact, it was really a matter of when, not if, in this particular case, even if the employees may not have expected it.
"This cut was expected. It always happens after an acquisition," said telecommunications analyst Jeff Kagan. "On one hand, this will shake Motorola workers to the core. They were not really expecting this. That is not their world."
This is unlikely to have an impact on Google at present, but this cut is not the last, added Kagan. While painful for those getting cut -- this move may be required.
"We have to remember Motorola Mobility has been struggling for years," emphasized Kagan. "It's all about restructuring to stay profitable."
Not First, Not Last
The mobile phone market is in a very different place today from just a few years ago. The old guard has been overtaken by the "Young Turks," including Apple with its iPhone, and Samsung with its Google Android-based devices. This has left for much uncertainty in the handset market, as companies such as Palm and Motorola have been acquired, while Nokia and RIM struggle to stay afloat.
"The bigger picture here is that Motorola isn't alone as a handset maker in facing difficult times in the market," said Ian Fogg, analyst at IHS Screen Digest. "Sony, HTC and others are facing troubles. Outside of Samsung and Apple, everyone is seeming to have a hard time."
Given that those two companies are now embattled in what is shaping up to the first of many potential rounds over patent disputes, Google's purchase of Motorola for its IP is becoming ever more clear. While Google has largely avoided these recent patent disputes regarding Android -- and successfully fended off patent accusations from Oracle over Java -- it isn't hard to imagine that the company could find itself at odds over Android in the future.
"This is really a double-edged sword," added Fogg. "Google has those patents that make them stronger, but at the same time that doesn't exactly take Motorola out of the line of fire."
Hard or Soft Play?
The final question in this round of layoffs is where Google will take Motorola Mobility. Is this going to be about developing the Android operating system and having Samsung and other manufacturers handle the hardware? Or will it try to take back the hardware market with the Motorola brand?
"There is the hardware expertise that Motorola brings for a future flagship Nexus device," said Silva. "There will be continued Nexus design work done by the team."
But this is another double-edged sword. Could it be successful enough to make Samsung question its support for Android? And if isn't successful, does it just end up as a costly venture?
"Some thought Motorola was doing better with their Droid devices," noted Kagan. "While they are doing better, they are not doing good enough to carry the existing company. It also raises questions about the future of Motorola. Did Google acquire Motorola for the technology and patents -- or for the company, workers and all? That is the question we will have to try and answer going forward."