NEWS ANALYSIS: Google has decided to cut 20 percent of Motorola's workforce. What do these staff cuts mean for both companies? Are they a prudent staff reduction to boost profitability or early signs that Google made a mistake?
When Google announced that it would buy Motorola Mobility for $12.5 billion, the
company's critics came out in droves, saying that it would hurt the mobile
space. Google, meanwhile, reassured critics that it would stay far away from
Motorola and allow the company to operate independently.
However, on Aug. 13,
Google
announced that it was cutting 20 percent of Motorola's workforce. About
one-third of those employees would be cut from the United States, while the remaining
two-thirds would be cut overseas. The move is designed to increase Motorola's
chances of sustaining profitability over the long-term, according to Google.
But perhaps the cuts say much more than that. Whenever a company as successful as
Google reduces a firm's workforce, it indicates issues and certain hints at its
future strategy. That can't be overlooked in this case.
This is what Google's Motorola cuts say about the company:
1. Expect more Google
involvement than originally thought
Although Google said that it would allow Motorola to operate independently, it's clear
now that the search giant will be influencing at least some decisions at its
new mobile division. Layoffs are a keen indicator of how much involvement a
parent company has. In this case, Google has quite a bit of influence.
2. Google's management is worried
There's a real chance here that Google's management is starting to realize that it
might have bitten off more than it can chew with Motorola. For $12.5 billion,
Google bought a company that, while rich in patents, is quite poor in terms of
consumer appeal. Layoffs might be just the first attempt on Google's part to
find a way to make Motorola look like a good buy.
3. It really was about the patents
Then again, the layoffs might simply indicate that
Google
really only cared about Motorola's patent portfolio. The company made it
known that the patents were integral in its decision to acquire Motorola, and
by gutting the mobile firm's staff, maybe it's simply saying that the patents
were worth far more in the acquisition than outsiders might have thought.
4. Product cuts are next
Motorola is well-known for its smartphones and tablets, but the company offers a host of
products across the home-entertainment and networking industries. That said, it
appears that Google really only cares about the company's mobile options. That
might be enough for Google to soon announce significant product cuts at
Motorola.
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