- Associated Press - Monday, August 13, 2012

NEW YORK — Google Inc. is making its largest-ever round of layoffs, with plans to cut about 4,000 jobs at Motorola Mobility just three months after buying the struggling cellphone pioneer.

The move isn’t surprising, given years of plummeting sales at Motorola, but it signals that Google doesn’t intend to drag Motorola along as a money-losing venture.

Google’s stock rose $16.67, or 2.6 percent, to $658.67 in afternoon trading Monday following the announcement.

The reductions represent about 20 percent of Motorola Mobility’s 20,000 employees and 7 percent of Google’s overall workforce. Google says two-thirds of the job cuts will be outside of the United States.

Google, which has been expanding for more than a decade, doesn’t have a history of mass layoffs. In previous rounds, Google at most cut a few hundred workers.

Motorola, however, cut thousands of jobs in recent years as its cellphone division saw sales plummet. It hasn’t produced a mass-market hit since it introduced the Razr cellphone in 2004. It now makes phones that run on Google’s Android system, but rivals such as Samsung Electronics have been more successful at it.

Motorola split in early 2011. Google snapped up Motorola Mobility, the half that makes cellphones and cable set-top boxes, for $12.4 billion. Motorola Solutions, which makes police scanners and other professional products, remains a separate company.

The Motorola deal is Google’s largest acquisition and plunges it into the business of consumer products. It puts Google in a position of competing with the same companies it considers partners.

Google has pledged to keep the Motorola hardware business separate from its Android software division and promised to treat Motorola like an outside company. It turned to AsusTek Computer Inc. rather than its own division to make a Google-branded tablet computer called Nexus 7.

Google’s chief goal in buying Motorola was to use its large patent portfolio to bolster its legal defenses.

Apple has been suing Samsung, Motorola and other makers of Android smartphones, saying they copied the iPhone. By acquiring Motorola’s patents and transferring them to Android phone makers such as HTC Corp., Google can bolster its legal defenses and set itself up to countersue Apple.

Morgan Stanley analyst Scott Devitt wrote in a morning report, before Google’s announcement, that he believes Google is limiting its ambitions for Motorola Mobility, a strategy he believes to be good for investors. Devitt expects Google to curtail Motorola to producing just a few smartphone designs per year and perhaps some tablets as well.

Before the acquisition, Motorola had been trying to turn itself around by focusing on smartphones, which have higher profit margins than regular cellphones. In the first quarter, Motorola sold 5.1 million smartphones and 3.7 million “dumb” phones. The cuts announced Monday will shift the company toward smartphones even further. The migration toward smartphones has slowed Motorola’s decline, but it has still lost money in 14 out of the past 16 quarters.



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