Motorola Mobility’s new owner, Google, is planning to streamline the finances of the struggling phone maker by downsizing its workforce. According to Google, it has began the announcement that about 20% of Motorola’s employees around the world will be removed.
The percentage covers about 4000 positions and more than a third of the cuts will occur in the United States, according to the report of The New York Times. Motorola mobility will be making lesser number of handsets and will be relinquishing markets that are not profitable.
Google bought the cell phone maker for about $12.4 billion this year for its huge portfolio of thousands of patent applications and patents. Right after the purchase, there were speculations going on that some of the Motorola’s divisions will be sold off like the one that sells set-top boxes to cable providers in the United States.
In a separate report, Google has reportedly paid a big premium of about $5.5 billion to own some patents and technology from Motorola Mobility. Google filed a document to Securities and Exchange Commission last July showing how it valued the $12.4 billion acquisition of Motorola Mobility. The largest value, according to Google, was the $5.5 billion worth of patents and pending patents waiting for approval. The Web giant said that this large chunk of the entire acquisition will prove to be the most important to investors.
Motorola has fallen way behind its biggest rivals, Samsung and Apple, in the mobile business. Google hopes to shore up its Android mobile market and become a hardware maker as well. Larry Page plans to use Motorola so that Google can also make its own better tablets and smartphones.
But some analysts have doubts whether Google can really compete in the brutal environment of mobile market, where 90% of the profits are shared between Samsung and Apple. The rest, about ten percent are shared by Nokia, RIM, LG, Motorola, and others.
Motorola started in 1928 in Chicago and gradually became a cellphone maker giant in 1973 when it first launch the commercial mobile phone. By 2004, Motorola was poised to lead the market by introducing the popular Razr but Samsung and Apple managed to win the hearts of consumers with their Galaxy and iPhones units.
Charles S. Golvin, an analyst from Forrester Research, said that the company “got left in the dust by the competition and kind of missed the smartphone transition.”
While the bulk of the workforce cuts will hit the regular employees, Google is also overhauling its Motorola’s management by removing 40 per cent of its vice presidents. New senior executives will come onboard as well. Facilities in India, Asia, research and development centers in Beijing, Sunnyvale, and Chicago will be the affected sites.