Involves 20 per cent of workforce, one-third of offices
MOUNTAIN VIEW, CAL. (Reuters) — Motorola Mobility, which was bought by Google for $12.5 billion, will cut 20 per cent of its workforce and shut nearly one-third of its offices worldwide, Google said on Monday.
"These changes are designed to return Motorola's mobile devices unit to profitability, after it lost money in 14 of the last 16 quarters," Google said in a filing with the United States Securities and Exchange Commission. "While lower expenses are likely to lag the immediate negative impact to revenue, Google sees these actions as a key step for Motorola to achieve sustainable profitability." The Internet search company expects to take severance-related charge of up to $275 million mostly in the third quarter, it said in the filing. Google, which expects to record the remaining severance-related costs by the end of 2012, said it could also incur other related restructuring charges mainly in the third quarter. The company said it could not currently predict the amount of these other charges but added they could be significant. "Motorola is committed to helping (the employees) through this difficult transition and will be providing generous severance packages, as well as outplacement services to help people find new jobs," the Google spokeswoman said. The search engine agreed to buy Motorola Mobility 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. Google had previously reserved its comments on Motorola Mobility's future but is now outlining the first steps to turn the company around, under which the ailing cellphone maker will lay off 4,000 employees. One-third of the jobs lost will be in the U.S., but the company has not specified where or what facilities would be affected. 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 dozens. Motorola Mobility, which has 94 offices throughout the world, will centre research and development in Chicago, Sunnyvale, Cal., and Beijing. In addition to the planned cuts, Google has downsized Motorola Mobility's management, letting go 40 per cent of its vice-presidents, but has also hired new senior executives, the New York Times said. Shares in Google rose nearly two per cent to $652.50 in trading before the bell on Monday. They closed at $642 on the Nasdaq on Friday.
