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Google’s Motorola Mobility unit is selling off a chunk that Google didn’t want to keep—the Motorola Home division that sells set-top boxes for consumer cable television services.
Now with the unit’s sale getting under way and Google’s related Motorola Mobility layoffs and office closings continuing around the world, Google can refocus its remaining Motorola business on the smartphone and mobile markets that Google craves.
The sale of the Motorola Home unit is being made to cable equipment maker Arris for $2.35 billion in cash and stock, according to an announcement from the companies. Google originally paid $12.5 billion for Motorola Mobility in May.
“Acquiring Motorola Home builds on Arris’ rich history, creating a global player with significant footprint, revenue and cash flow,” Bob Stanzione, chairman and CEO of Arris, said in a statement. “It also adds expertise in video and a larger presence in the home to our core strengths in voice and data, ensuring we are even better positioned to capitalize on and manage the evolution toward multi-screen home entertainment.”
Under the deal, Google will receive $2.05 billion in cash and about $300 million in newly issued Arris shares, according to the announcement.
Arris officials said the acquisition of Motorola Home will also help the company increase its customer base and its patent portfolio, and provide a license to a wide array of Motorola Mobility patents.
“This transformational combination of two complementary businesses will create a leading end-to-end provider of today’s video, data, and voice products and tomorrow’s next-generation IP-based broadband products,” said Stanzione. “Ever-expanding consumer demand for bandwidth will continue to drive growth across cloud and network technologies we provide that enable innovative home entertainment products and services.”
Google has been shedding pieces of the Motorola Mobility unit since it acquired the company as it worked to return the division to profitability following several years in the red before its purchase by Google.
Motorola Home, which has been a bright spot within Motorola Mobility, according to Arris, garnered revenue of $3.4 billion for the four quarters that ended Sept. 30. The Arris acquisition of the Home unit is expected to close by the second quarter of 2013.
At least one other company, British set-top box maker Pace, was also in the bidding to acquire Motorola Home, but it eventually lost out to Arris.
In an announcement Dec. 20, Pace officials said the company was “unable to reach an agreement with Google on terms that the Board believes would have been in the interests of Pace’s shareholders.”
They said they had “viewed the potential acquisition of Google’s Motorola Home business as an opportunity to accelerate our stated strategy, but only if real shareholder value could be delivered. Although we had the support of our major shareholders and committed facilities, we could not reach an appropriate conclusion to the potential transaction.”
Google had put the Motorola Home unit up for sale in late August, just a few weeks after the search giant announced the layoffs of about 4,000 workers there, which was about 20 percent of the workforce. The job cuts came along with the closing of 30 of Motorola’s 90 facilities around the world. Two-thirds of the job cuts were set to occur outside the United States. Those moves came as Google has been working to simplify Motorola’s mobile product portfolio—shifting the emphasis from feature phones to more innovative and profitable devices, according to Google.
The cuts are being made to try to reverse financial losses in the Motorola unit, which has lost money in 14 of the last 16 quarters.
As part of the Motorola shake-up, Google is also cutting about 40 percent of the vice presidents in the Motorola unit.
In July, Google gave its first revenue report since officially acquiring Motorola Mobility, posting second-quarter revenue of $12.21 billion, which was a 35 percent increase from $9.03 billion in the second quarter of 2011. The company released its fiscal 2012 second-quarter results July 19. The quarter ended June 30.
The $12.21 billion second-quarter revenue was up 15 percent from the first quarter of the year, when Google reported $10.65 billion in revenue, according to the company. GAAP (generally accepted accounting principles) net income reported in the second quarter was $2.79 billion, compared with $2.51 billion in the second quarter of 2011.
Much of the value in the purchase of Motorola was fueled by Google’s desire to bolster its own patent portfolio by bringing in Motorola’s estimated $5.5 billion worth of patent holdings. Those patents are seen by Google as assisting the company as it expands its reach into mobile hardware and services around the world.
Earlier in December, Google’s Motorola unit closed its South Korean operations as part of the changes within the business.