Google outlined part of the plan in this 8-K filing, noting that two-thirds of the job cuts would occur outside the U.S. Google is closing about a third of 90 facilities worldwide as it shifts its emphasis away from cheaper feature phones to the more profitable smartphone market.
"These changes are designed to return Motorola's mobile devices unit to profitability after it lost money in fourteen of the last sixteen quarters," the filing noted, adding that the decision will result in a severance-related charge of "no greater than $275 million." Most of that will be recognized in the third quarter.
Dennis Woodside, the new head of the Motorola unit, told The New York Times that the company will stop making lower-end phones as part of its plan to exit unprofitable markets, adding that Motorola will chop down the number of devices it makes from the 27 it launched in the last year to just a few. "We're excited about the smartphone business," Woodside told the paper.
The Times also reported that Google has "gutted Motorola management," letting go 40 percent of its vice presidents."
Why this matters
Word of the job cuts come almost three months after Google closed its $12.5 billion acquisition of the maker of smartphones, set-tops, cable modems and broadband access gear. Google bought Motorola Mobility and its raft of patents primarily to defend Android, but these major operational moves suggest that Google still wants the newly acquired division to continue making smartphones and tablets, but will have to cut deeply if it's to have a shot at catching up with the likes of Samsung Corp. and Apple Inc. (Nasdaq: AAPL). (See Samsung Leads Smartphone Sector.)
The 8-K made no mention of cuts involving Motorola's Home division, which makes set-tops and broadband modems and access equipment. Google is making plans to put the Home division on the block as soon as this fall, according to industry sources and people familiar with the plan. Motorola's Home division recently reassigned a "small portion" of its field engineering team to an outsourcing firm, but said the process was well underway before Google acquired the company.
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— Jeff Baumgartner, Site Editor, Light Reading Cable