Matt Brian took at look at the SEC filing for Google’s big Motorola layoffs:
Ensuring employees are well compensated following the cuts, Google says it will provide “generous severance packages, as well as outplacement services to help the employees find new jobs.” All of this is expected to cost the company $275 million, which will be shown in Google’s third fiscal quarter, with further costs being realised by the end of the year.
So when I poked fun at the $12.5 billion price for a company that has lost money for four years in a row, I actually meant $12.775 billion. And rising?
Claire Cain Miller on Motorola cutting 20% of its work force:
One-third of the 4,000 jobs lost will be in the United States. The company plans to leave unprofitable markets, stop making low-end devices and focus on a few cellphones instead of dozens, said Dennis Woodside, Motorola’s new chief executive, in a rare interview.
Makes sense, because:
But Apple and Samsung won consumers’ hearts with the more exciting iPhone and Galaxy phones. Motorola Mobility — which split last year from Motorola Solutions, the division that makes devices like police radios — lost $233 million in its first six weeks under Google. The phone business has been unprofitable for 14 of the last 16 quarters.
That’s basically four straight years of losing money. This is a company that Google paid $12.5 billion for.
Yes, I’m sure it was always mainly about the patents, but Google nearly doubled its workforce with the deal and added quite a bit of red to their bottom line quarter after quarter. I bet these aren’t the only cuts we see.
But it certainly sounds like Woodside and Regina Dugan, formerly of Darpa, are going about the reboot the right way. The most interesting aspect may be the employees who wear their self-enforced resignation dates — two years from now — on their name tags so they have a sense of urgency (an idea Dugan borrowed from Darpa).
As expected, most of the money paid, $5.5 billion, was for patents and IP. What’s curious is the $2.6 billion paid for “goodwill”. In other words, that’s the amount Google paid above what they considered the fair market value to be because they think the combination will be fruitful down the road.
If you’ve heard the term “goodwill” recently, it’s because that’s how Microsoft categorized their $6.2 billion aQuantive write-down. Microsoft ended up eating shit on all those billions because expected synergies didn’t exactly work out as planned. Okay, they didn’t work out at all. And remember, aQuantive was a successful, money-making company at the time Microsoft acquired them. Motorola? Not so much.
So far, it looks like Google’s billions acquired an asset that is dragging down their bottom line. Maybe that changes, maybe it doesn’t — it’s obviously too early to tell. But the recent history of Motorola certainly doesn’t look good. Right now, that sure looks like a very pricey $2.6 billion.
Google had a solid quarter, beating most estimates. But this is interesting:
Motorola Operating Loss – GAAP operating loss for Motorola was $233 million ($192 million for the mobile segment and $41 million for the home segment), or -19% of Motorola revenues in the second quarter of 2012.
In other words, in their first quarter as a Google subsidiary, Motorola managed to lose more money than ever before. For some context, for the entire 2011 fiscal year, Motorola posted a loss of $285 million.
Need I remind you, this is a company that Google paid $12.5 billion for.
Ina Fried:
Google is believed to also be open to a deal, but the two sides appear very far apart in the kind of deal they envision. Sources close to Microsoft say the company is interested only in the kind of deal that would see the balance of licensing revenue headed in its direction.
So Google (now the official owner of Motorola) is going to cut a deal with Microsoft to pay them a portion of each Android handset sale? Yeah… Don’t see that happening. But it would be pretty humorous.
Dan Frommer on the Google/Motorola deal:
One opportunity would be to formally split Android devices into three tracks: Plain-old-Android, do what you want with it; the Nexus program (significant Google control, available to select partners); and a third line (complete Google control, exclusive to Motorola, ideally the highest-quality line). We’ll see if that happens — and if it does, whether it works. Everyone has different motivations for Android: Google, phone manufacturers, carriers, and consumers. They might never harmonize.
I do think track three will happen eventually. And when it does, track two will become meaningless. You simply cannot have your cake and eat it too — and then throw it up and eat it again.
It would be one thing to point out StarTAC once as a fun homage to Motorola’s history, but Google goes out of its way to point out the device in both their official blog post about the Motorola deal and the propaganda facts onesheet.
The money line:
Its many industry milestones include the introduction of the world’s first portable cell phone nearly 30 years ago, and the StarTAC–the smallest and lightest phone in the world when it was launched.
I mean, that was 16 years ago! Google couldn’t come up with some innovation a little more recent?
Admittedly, it is pretty hard. The only recent innovation I can nail down is perfecting the art of losing money.
…just keeps getting better and better.
Coming off a quarter in which they lost $80 million, Motorola managed to do the impossible in Q1 — lose even more! $86 million to be exact.
The mobile devices division actually lost $121 million.
And that was with revenues increasing.
This Motorola deal continues its downward spiral. It’s already a bad — some might say awful — deal from a pure business perspective. But now the seemingly lone bright spot of the deal for Google — the patents — are turning into a headache as well.
Bloomberg only mildly touches on some of this, Daniel Eran Dilger of AppleInsider and Florian Mueller of FOSS Patents go deeper. Of note: if Google is committed to staying the course with Motorola’s patent licensing strategy (which they say they are), they’re going to find themselves enforcing patents related to H.264, the video codec that Google itself is trying to kill with WebM.
They also may find themselves suing Apple over patents and demanding a royalty for each iPhone sold.
The problem Google is likely to face is that if they aren’t agressive with the patents in the way that Motorola has been, how can they possibly hope to license them in the way they say they will? Who would license something when they don’t have to? This is a slippery slope.
Bigger picture: after going on and on about the dubious patent tactics by rivals like Apple and Microsoft (and rightfully so in most cases), Google may find themselves in the same position thanks to this Motorola deal.
