Google cutting 4,000 at Motorola unit

August 13, 2012

By The Associated Press and City Room

(AP Photo/Mark Lennihan, File)
Three months ago, Google bought Motorola for $12.5 billion.

Google is cutting about 4,000 jobs at its Motorola Mobility cellphone business and will close or consolidate about one-third of its 90 locations. 

The job cuts annouced in a regulatory filing Monday include about 700 layoffs at the company's north suburban Libertyville headquarters, according to a spokesperson.

The reductions represent about 20 percent of Motorola Mobility's 20,000 employees, and seven percent of Google's overall work force. Two-third of the job cuts will take place outside of the U.S., Google said.

It also means Motorola will bring about 2,300 jobs to downtown Chicago when it relocates its corporate headquarters next summer, instead of the 3,000 positions oroginally promised.

"I hate to say it, but it’s, uh, just more broken promises, said Libertyville Terry Weppler.

Weppler points out that, just last year, Motorola got $110 million in tax incentives from the state to keep jobs in his town. But then last month, the company abruptly announced its move to the city.

And now, the layoffs.

"It’s gonna hurt our residents, and all of the central Lake County residents whose jobs are being lost. It’s gonna affect unemployment in Lake County," he said.

The job cuts announced Monday will also mean that Motorola Mobility will lose out on its tax breaks with the state, because its workforce will fall short of the 2,500 mark agreed to as part of the deal, according to a company spokesperson.

Meanwhile, Chicago mayor Rahm Emanuel's administration maintains the 2,300 jobs coming to Chicago will still be a boon for the city.

 

"The employees that are being laid off in the suburbs are outstanding employees who would be great additions to any company in Chicago or the Chicagoland area," Emanuel said in an emailed statement. "All of these efforts are aimed at getting the company moving in the right direction, and I believe they will.”

The job eliminations come three months after Google bought the once-dominant U.S. cellphone maker for $12.5 billion, chiefly with a view to using its large patent portfolio to bolster its legal defenses.

The cellphone pioneer has been struggling for years. It hadn't produced a mass-market hit since it introduced the Razr cellphone in 2005 and its market share has plummeted.

Before the acquisition, Motorola had been trying to turn itself around by focusing on smartphones, and the cuts announced Monday will shift that goal even further. In the first quarter, Motorola sold 5.1 million smartphones and 3.7 million "dumb" phones.

The migration toward smartphones has slowed Motorola's decline, but it has still lost money in 14 out of the last 16 quarters.

Google said in a filing with the Securities and Exchange Commission that the changes are intended to make the unit profitable, but warned that investors should expect revenue to fluctuate over the next few quarters, and sales will drop before the cost savings take effect.

Severance payments will cost Google about $275 million, which will largely be recognized in the current quarter. The company also expects to book an unspecified amount in restructuring charges, mostly in the quarter.

Motorola announced in June that it would move its headquarters from the Chicago suburb of Libertyville to downtown Chicago.

Google shares rose $7, or 1.1 percent, to $649 in morning trading.