Motorola Mobility is reportedly laying-off more than 20% of workforce in Chicago and Libertyville areas lately. A total of 700 workers will be sent home, bringing along their last pay. Prior to this, pertinent rumors spread in the past few weeks telling that Google Inc., which bought the entire company for $12.4 billion in May, will be laying off employees in a bid to steer it back to profitability. But there was no information if some American employees would lose their jobs due to this drive.
According to reports, Google wants to pull out markets that are unprofitable and opts to focus on making just a few cell phone models instead of dozens. This means that Motorola Mobility has to create certain strategy that carries risks in a highly competitive gadgets market.
Because of this decision, many people are going to lose their jobs. Motorola Mobility is laying off 4,000 workers, hence, cutting thousands of jobs. That is about 20 percent of its entire workface. Google said this Monday that its new vision for Motorola Mobility involves shuttering about 90 facilities worldwide. This is to simplify the Motorola line of mobile phones “from feature phones to more innovative and profitable devices.”
Motorola Mobility CEO Dennies Woodside, in an interview, said that his company will be leaving unprofitable markets. He also added that the company will no longer be making features and other low-end devices, and will shift its emphasis into more robust devices that will help drive profits. In 14 of the last 16 quarters, Motorola Mobility hasn’t had a profitable quarter.
The New York Times also reported that the cuts will hit operations in Asia, focusing research and development on the existing units in Chicago, Sunnyvale and Beijing.
This could be a hint that Google is eyeing to change the company into a profitable competitor. Investors should then expect to see significant revenue variability for Motorola for several quarters. Google sees these actions as a key step for Motorola to achieve sustainable profitability.
Google explained in Securities and Exchange Commission that Motorola understands how hard these changes will be for the employees concerned and is committed to helping them. The spokesperson said, “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.”
Severance packages will be provided to all affected employees as well as outplacement services for employees to find new jobs. According to the company, the total cost of its compassion is $275 million in severance and related layoff costs.
There are a lot of reasons as to why a layoff occurs. When a company is experiencing financial difficulties, jobs are eliminated regardless of the employee’s performance. This is common in businesses where profit margins are especially thin and any reduction in the labor costs means a better chance of survival in the marketplace.
Despite layoffs, Google’s Motorola Strategy aims at innovation.