Google's Motorola Unit to Cut 10% of Workforce

Google Inc.'s GOOG -0.13% Motorola Mobility hardware unit has begun laying off about 1,200 employees, or more than 10% of its headcount, according to a company email reviewed by The Wall Street Journal, as the smartphone maker continues trying to return to profitability.

Motorola staffers were informed by the company via email this week that "while we're very optimistic about the new products in our pipeline, we still face challenges." The company email added that "our costs are too high, we're operating in markets where we're not competitive and we're losing money." The layoffs will affect workers in the U.S., China and India.

A Motorola spokesman said: "These cuts are a continuation of the reductions we announced last summer. It's obviously very hard for the employees concerned, and we are committed to helping them through this difficult transition."

The new cuts come on top of a 20% reduction of Motorola's workforce that started last August, when it said it would lay off 4,000 employees. As of the end of 2012, Google said Motorola had 11,113 employees. That didn't include the Motorola Home business, which makes television set-top boxes and was sold to Arris Group Inc. ARRS +0.45% for $2.35 billion in December.

Google agreed to pay $12.5 billion for Motorola in a deal struck in mid-2011. Since the acquisition was completed, Motorola has continued to show operating losses as its smartphone and tablet market share has waned. In the third quarter of 2012 it posted an operating loss of more than $500 million and a loss of more than $350 million in the fourth quarter.

Google has transferred numerous executives and product managers to help run Motorola with the hope of producing devices that would rival those of Apple Inc. AAPL +0.26% and Samsung Electronics Co. 005930.SE -1.38% In December, The Wall Street Journal reported Motorola was working on a device it called the "X Phone" that could become the unit's flagship device.


At the same time, Google has pledged to not give special advantages to Motorola, which like Samsung uses Google's Android mobile operating software to power its devices.

Google executives have referred to Motorola as an insurance policy in case Google loses control of Android to Samsung, which has commanded a growing share of the Android-based device market, according to people familiar with the matter. In such an event, Google would pour more of its resources into Motorola and could potentially integrate it with the Android software unit, these people said. A Motorola spokesman declined to comment.

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