Google to cut 4,000 Motorola Mobility jobs, shares rise

Mon Aug 13, 2012 4:37pm EDT
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By Sayantani Ghosh and Alexei Oreskovic

(Reuters) - 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 nearly 3 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 you 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 capital."

Google bought the money-losing cellphone maker for $12.5 billion last year - its largest acquisition ever - aiming to use Motorola Mobility's patents to fend off legal attacks on its Android mobile platform and expand beyond its software business.

By pairing Motorola's smartphone hardware business with its Android software, Google may have a better chance of mounting a direct challenge to Apple Inc's popular iPhone, technology market observers believe.

But the acquisition has also raised concerns on Wall Street as investors fret that Google, the world's No. 1 Web search engine, is entering a business with much lower profit margins and in which it has little experience.

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.   Continued...

A Motorola Droid phone is seen displaying the Google search page in New York August 15, 2011. REUTERS/Brendan McDermid