Google axes 20% of Motorola workforce

Company making moves to get Motorola back to profitability, though it may take a while

Financial trends and news by Steven Loeb
August 13, 2012
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When Google first announced its purchase of Motorola, it was to protect itself from an onslaught of patent lawsuits. Now that Google got what it wanted, reality is now setting in, and there are going to be some deep cuts coming very soon.

Google will be laying off 4,000 workers at Motorola Mobility, in an effort to bring the company back to profitability, it was announced in a filing with the Securities and Exchange Commission.

Motorola employs 20,000 workers, which means that 20% of the company will be losing their jobs. Two thirds of the layoffs will occur outside the United States.

In addition, Motorola will be closing or consolidating roughly one-third of its 90 facilities, while also shifting its focus away from feature phones and toward  “more innovative and profitable devices,” the filing said.

“Motorola understands how hard these changes will be for the employees concerned and is committed to helping them through this difficult transition. Motorola will be providing generous severance packages, as well as outplacement services to help the employees find new jobs.”

Google does not expect its severance package to exceed $275 million.

Motorola has lost money in 14 of it last 16 quarters, and Google says it sees these layoffs as a key step toward getting the company back on its feet, though it did warn that “investors should expect to see significant revenue variability for Motorola for several quarters.”

"While we expect this strategy to create new opportunities and help return Motorola's mobile devices unit to profitability, we understand how hard these changes will be for the employees concerned.  Motorola is committed to helping them through this difficult transition and will be providing generous severance packages, as well as outplacement services to help people find new jobs,” a Google spokesperson told VatorNews.

This is not the first time Motorola has been forced to lay off workers. In October 2011, the company announced it would be laying off 800 workers after a disappointing quarterly report, despite half of its loses being attributed to the Google acquisition.

Motorola has seen its market share erode over the past two years. In October 2009, it was the top device manufacturer, with 24.1% of the market. By June of 2012, that number had whittled down to 11.7%, putting the company in a distant fourth place.

Google purchased Motorola in August 2011 for $12.5 billion, its largest acquisition ever, as a way to for Google to strengthen the company’s patent portfolio. The deal resulted in Google gaining more than 17,000 new patents.

“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies,” Google CEO Larry Page wrote on the company’s blog at the time.

The merger was completed in May of 2012.

Google stock jumped nearly 3% in trading on Monday, up $18.01 to $660.01.

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