(Corrects to Motorola's mobile devices unit lost money,
* One-third of jobs lost will be in the United States
* Questions remain whether more cuts needed
* Charges expected mainly in third quarter
* Google shares up more than 2 percent
By Sayantani Ghosh
Aug 13 Google Inc will slash 20 percent
of the workforce of Motorola Mobility in the Internet search
giant's largest job cuts ever as it moves to make more
smartphones and fewer simple mobiles.
The news sent Google's shares up as much as 2 percent but
analysts said it was unclear if the cuts were enough to restore
the fortunes of Motorola, whose last hit was the Razr flip-phone
launched eight years ago.
"I think it's still going to be challenging to navigate the
waters (of the handset business); how do keep your partners
happy and how you push your own smartphone devices at the same
time," Morningstar Inc analyst Rick Summer said.
"This is the obvious step. The things that are harder are
how do you drive profitability, how do you carve out a niche for
Google devices, how to end up delivering solid returns on
Google bought the loss-making cellphone maker for $12.5
billion last year, aiming to use Motorola Mobility's patents to
fend off legal attacks on its Android mobile platform and expand
beyond its software business.
Motorola's mobile devices unit has lost money in 14 of the
last 16 quarters. In the second quarter, Motorola reported an
operating loss of $233 million on revenue of $1.25 billion.
While many questions remained over whether Motorola's
strategy, Morgan Stanley upgraded Google to "overweight" after
"We believe that Google is planning to reduce Motorola
Mobility's smartphone portfolio to a few reference Android
devices, and perhaps a couple of tablet devices," analysts at
the brokerage said.
Google had evaded questions about its plans for Motorola
Mobility when it reported quarterly results last month, saying
it had yet to complete its homework on the various businesses.
Recent media reports have suggested that Google is shopping
Motorola Mobility's television set-top box business which is not
the best fit with Google's high-profit-margin Internet business.
WHAT SIZE FITS?
Morningstar's Summer said he does not expect mass layoffs at
Motorola, but said things might change as Google reviews all of
the cellphone maker's units and tries to sell the TV unit.
Others were similarly unclear about the right size for
Motorola, which will close nearly a third of its offices.
"They are still learning what makes it a leaner meaner
machine. I think as we move into the new year, there maybe more
right-sizing," said Susquehanna Financial Group analyst Herman
Google said in a regulatory filing it expects to take a
severance-related charge of up to $275 million mostly in the
third quarter, but with some possibly trailing through to the
end of the year. It warned there could be some other significant
charges yet to be calculated.
Google shares were trading up 2.2 percent at $656.30 in
early afternoon trade on the Nasdaq. They touched a high of $655
One-third of the jobs lost will be in the United States, but
the company has not specified where or what facilities would be
Earlier the New York Times reported Google's plan and said
it was looking to shrink operations in Asia and India, by not
just exiting unprofitable markets, but also stopping making
low-end devices and focusing on a few cellphones instead of
Motorola Mobility, which has 94 offices throughout the
world, will center research and development in Chicago,
Sunnyvale, California and Beijing.
In addition to the planned cuts, Google has downsized
Motorola Mobility's management, letting go 40 percent of its
vice presidents, but has also hired new senior executives, the
New York Times said.
(Additional reporting by Juhi Arora and Siddharth Cavale in
Bangalore and Alexei Oreskovic in San Francisco; Editing by
Rodney Joyce and Leslie Gevirtz)