Google Trims Another 1,200 Motorola Jobs. Is This the Final Cut?

Google (NASDAQ: GOOGL  ) isn't done trimming the fat from its Motorola Mobility buyout.

The division will lose another 1,200 jobs in China, India, and America on top of the 4,000 cuts that were made last summer. The news comes from an internal email that was leaked to The Wall Street Journal and later confirmed by other sources.

Moreover, 5,000 Motorola workers are heading out to cable equipment firm Arris (NASDAQ: ARRS  ) in a game-changing spin-off that will triple Arris' sales overnight. The latest cuts will trim Motorola down to less than 10,000 employees. Google as a whole employs nearly 54.000 full-time workers right now.

How far will Google slash its Motorola costs? All things considered, the purported $12.5 billion sticker price has already come a long way down.

Motorola came to Mountain View with a satchel full of tax benefits that takes the effective purchase price down to just $3.8 billion. I think it's fair to assume that Google will do whatever it takes to reap the full benefits of those tax breaks, even if the process won't end until 2019.

Throw in $2.5 billion from Arris, and Google is left with a bargain-basement effective price of $1.3 billion. That would be a steal for Motorola's patent portfolio alone, and Google obviously still hopes to make something out of the handset operation.

Motorola gives Google some skin in the handset-sales game, though not nearly the full-body exposure that Apple (NASDAQ: AAPL  ) gets. Cupertino controls every step of the iPhone and iPad experience, from hardware to software to what services are allowed. As a result, every phone or tablet sold drops directly to Apple's bottom line.

But Google has to tread carefully with Motorola. Big G can't just give its own handsets better Android support and stronger marketing assistance than the plethora of existing partners. That would drive world-leading smartphone maker Samsung to embrace another platform instead of Android, such as its own Tizen software. Rumor has it that Sammy is moving in that direction anyway, and Google would be silly to provide the final push.

So Google is squeezing every ounce of efficiency it can out of Motorola, perhaps assuming that the sales side of the business won't improve much. Cutting costs much further than this would reduce Motorola to a pretty focused play on patents and tax discounts.

Could it happen? Anything is possible, but I'd be shocked to see another round of right-sizing here. Google would never tip its hand that openly.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2013, at 12:55 PM, c11827rocky wrote:

    I am a victim of the Motorola Mobility/Google conspiracy from last year during the first, more massive, lay-offs. We refused to believe Sanjay Jha was brought in strictly to increase the market value of Motorola in preparation of selling the company to Google. I believe this was information kept secret to the top levels of both companies to keep us all with our noses to the grindstone. I don't believe we will ever see Motorola Mobility relocate to downtown Chicago in the Merchandise Mart to make any kind of cell phone. I believe Google will make an announcement they have done their best to make the business profitable but cannot continue to lose money. I believe they will then sub-lease the Merchandise Mart space and focus on using the Motorola Mobility patent portfolio for their own purposes, which was undoubtedly the intended plan right from the beginning.

  • Report this Comment On March 09, 2013, at 1:18 PM, sugarbearz wrote:

    Google's time in the sun is coming to an end. They have become entirely too smug with their top position and now think they can do whatever they want and remain successful. Consumers and investors are fickle and are deserting Google like rats who can smell the stench of a sinking ship. Adios and good riddance Google! You have screwed over the people who made you big and we all love to watch the mighty fall.

  • Report this Comment On March 10, 2013, at 12:35 AM, douglasmalden wrote:

    Motorola Home acquisition ARRS Gross margin 35.8% down from 37.9%. Quarterly operating margin was 7.4% compared with 9% in the year-ago quarter.

    Potential impact on the business of the Motorola Home acquisition, the retention of employees and the ability of ARRIS to successfully integrate Motorola Home's business opportunities, technology, personnel and operations. GOOG lost and steel lousing money with Motorola Homes this why they won to get rid of it. And who will pay for acquisition and restructuring off course share holder ARRS issue more share and share prices goes down. This why ZACKS and found managers sales ARRS behind the scene after they are done they will start different story ARRS to expensive acquisition integration restructuring to expensive that result profit margin will go more down ARRS lousing market and money. Regular investor

    Look for the cover before happens.

  • Report this Comment On March 11, 2013, at 9:40 AM, DZPM wrote:

    Motorola Home acquisition ARRS Gross margin 35.8% down from 37.9%. Quarterly operating margin was 7.4% compared with 9% in the year-ago quarter.

    Potential impact on the business of the Motorola Home acquisition, the retention of employees and the ability of ARRIS to successfully integrate Motorola Home's business opportunities, technology, personnel and operations. GOOG lost and steel lousing money with Motorola Homes this why they won to get rid of it. And who will pay for acquisition and restructuring off course share holder ARRS issue more share and share prices goes down. This why ZACKS and found managers sales ARRS behind the scene after they are done they will start different story ARRS to expensive acquisition integration restructuring to expensive that result profit margin will go more down ARRS lousing market and money. Regular investor

    Look for the cover before happens.

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