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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