Motorola Mobility will take a $31 million hit, including $27 million for severance fees and $4 million for shuttering a facility. The move came before Google's purchase of the company.
Motorola Mobility (NYSE:MMI) is cutting 800 jobs and
closing facilities, a downsizing that will cost the phone maker a total of $31
million as it prepares to be acquired by Google (NASDAQ:GOOG).
Motorola agreed to be acquired Aug. 15 for $12.5 billion by the search giant,
which plans to use the Android OEM's patents to defend against rampant
litigation by Microsoft and Apple versus Android OEMs. The deal is expected to
close by the end of this year or in early 2012 pending regulatory approval.
Motorola Oct. 24 approved the job cuts and agreed to pay
out a pretax charge of $27 million in severance costs and $4 million to close
office space for the fourth quarter.
"Both of the company's business segments (the Mobile
Devices business and the Home business), as well as various corporate
functions, are impacted by the action and the action affects employees
globally,"
Motorola said in a 10-Q filing with the Securities and Exchange
Commission.
Motorola Oct. 27 reported third-quarter earnings of $3.26 billion on 12 cents
per share. While this was an 11 percent boost from a year ago, it fell short of
Wall Street analysts' consensus of $3.37 billion on 6 cents per share.
Worse for Motorola, which is fighting for Android
smartphone and tablet market share versus Samsung and HTC, is that it also sold fewer than expected devices for Q3.
Motorola sold 4.8 million Android smartphones and only 100,000 Xoom Honeycomb
tablets; analysts had been expecting over 5 million in smartphone sales and
around 300,000 or more Xooms.
The Android OEM is counting on a couple solid devices
from its smartphone and tablet categories. For handsets, there is the Motorola
Droid Bionic and the forthcoming
Droid Razr, which at only 7.1 millimeters thin will be the thinnest premium
smartphone on the market. At $299 on contract, it's certainly priced that way.
For tablets, Motorola reportedly has a couple new Xoom
LTE models in the pipeline. Meanwhile, the company is banking on joining Google
for additional financial protection.
Google has said it plans to operate Motorola as a
stand-alone company, similar to the way YouTube runs. This is a wise move, as
Samsung and HTC could be concerned Google might favor Motorola with early
Android upgrades.
However, some analysts don't believe Motorola's hardware
business will last long under the aegis of Google. Charter Equity Research
analyst Ed Snyder said Google will simply take Motorola's patents and spin out
the hardware business because it doesn't hew to the company's core competency
of search and advertising services.
"Google bought Motorola for its patents, not for its
hardware operations, which wouldn't contribute enough in revenue or profits to
offset the risk,"
Snyder said in a research note Oct. 27. "We therefore expect Motorola to
be spun or sold again in the not-so-distant future."
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