Google Inc. (GOOG: Quote) plans to cut about 4,000 jobs and close certain facilities at its recently acquired Motorola Mobility Holdings Inc. unit, in an effort to return the loss making mobile devices unit to profitability. Two-thirds of the reduction are set to occur outside of the U.S. The company will now shift the emphasis from feature phones to more innovative and profitable devices.
In a filing with the U.S. Securities and Exchange Commission, the search engine giant said it will cut about 20 percent of the total 20,000 employees at the mobile device unit. In addition, Motorola Mobility plans to close or consolidate about one-third of its 90 facilities, as well as simplify its mobile product portfolio. Google expects to incur a severance-related charge of no greater than $275 million and most of it to be recognized in the third quarter.
Though Motorola Mobility lost money in fourteen of the last sixteen quarters, it expects to return to profitability with the restructuring. In the filing, Google said the investors should expect to see significant revenue variability for Motorola for several quarters. The company said that lower expenses are likely to lag the immediate negative impact to revenue, and these actions are key steps for Motorola to achieve sustainable profitability.
Google added that Motorola understands how hard these changes will be for the concerned employees and that its unit is committed to helping them through this difficult transition. Motorola will provide generous severance packages, as well as outplacement services to help the employees find new jobs.
Of the remaining severance-related costs, the company expects to recognize it by the end of 2012 and to incur majority of restructuring charges related to these actions to be recognized in the third quarter. Google noted that these additional charges could be significant, although it cannot currently predict the amount of these at this time.
Google, the provider of world leading mobile Android software, bought Motorola in May this year for about $12.5 billion adding to it a trove of more than 17,000 patents. The acquisition strengthens its move to hardware market and steps up competition with competitor Apple Inc. (AAPL: Quote).
Google's acquisition of Motorola is expected to help it create better Android devices. While Google's Android mobile operating system has grabbed a discernible share of the smartphone market, tablets based on its software are yet to unsettle iPad's dominant position that has a near two-third market share.
Motorola unit's head Dennis Woodside reportedly said earlier that the company plans to focus on a few devices and then concentrate on marketing resources to sell them.
As per reports, Google has also shaken up Motorola management, cutting 40 percent of its vice presidents.
In pre-market activity, Google shares gained $8.21 or 1.28 percent and are currently trading at $650.21.
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by RTT Staff Writer
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