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Google Axes Another 10% at Motorola, Raising Doubts

Google Axes Another 10% at Motorola, Raising Doubts
March 8, 2013 2:14PM

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"The reality is when Google acquired Motorola they were primarily trying to acquire a patent portfolio," said analyst Rob Enderle. "Google wasn't really sure it wanted the rest of the company and they clearly didn't know how to manage it." Enderle said Google "lacks the skill set -- and the interest -- to keep Motorola running as a hardware manufacturer."

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Google is paring down its recently acquired Motorola Mobility hardware division, selling off parts of the company and laying off staff. After axing 20 percent of Motorola's staff in 2012, the technology giant is whacking another 10 percent of its head count in 2013. About 1,200 employees will receive pink slips.

The Wall Street Journal first reported the layoffs, citing an internal memo. According to the Journal, Motorola staffers got the bad news in an e-mail this week that said, "while we're very optimistic about the new products in our pipeline, we still face challenges." The memo also noted, "our costs are too high, we're operating in markets where we're not competitive and we're losing money."

One more point from the Journal article: A Motorola spokesperson said the cuts are merely a continuation of the reductions Google announced last summer.

"It's obviously very hard for the employees concerned," the spokesperson said, "and we are committed to helping them through this difficult transition."

Losing Money

Can Google turn Motorola around and drive profitable product innovation or will it turn out to be a bust? Google acquired Motorola for $12.5 billion. But not much has happened since in terms of innovation.

Many have been waiting and watching for Google to get more specific about its Motorola agenda, particularly after it entered a deal to sell the Motorola Home business to Arris Group for $2.35 billion late last year. As part of its quarterly earnings report in January, Google hinted at its plans for Motorola.

"We're not in the business of losing money with Motorola," said Google CFO Patrick Pichette on the investors call. "We're 120 days into this journey, and we've inherited 12 to 18 months of product pipeline. With product restructuring, it does take time for new product to show up. Be ready for a lot of fluctuation in our P and L [profit and loss statements] over the next quarter. It's just the nature of the beast when you're reinventing a business."

Shutting Down Motorola?

Rob Enderle, principal analyst at the Enderle Group, told us this type of dwindling down was expected.

"The reality is when Google acquired Motorola they were primarily trying to acquire a patent portfolio," Enderle said. "Google wasn't really sure it wanted the rest of the company and they clearly didn't know how to manage it."

With the acquisition, some industry analysts expected Google to move through a process of shutting Motorola down rather than building up its product line. Enderle said Google "lacks the skill set -- and the interest -- to keep Motorola running as a hardware manufacturer."

"Google does everything from self-driving cars to alternative power," he said. "Actually building the devices wasn't something they seemed to ever really wanted to do."

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