Google keeps pink slips coming as it tries to turn around Motorola Mobility

By Nathaniel Mott , written on March 8, 2013

From The News Desk

Google continues to trim the fat around Motorola Mobility, with Reuters and the Wall Street Journal reporting that the company plans to lay off 1,200 employees, or 10 percent of its workforce. These cuts follow the 4,000 pink slips handed out last year, and are said to be Google's latest attempt to make the company it spent $12.5 billion to acquire into something more than a glorified patent portfolio.

The tech press and investors alike have been wary of the Google-Motorola deal since it was struck in 2011. But there might yet be some hope for a turnaround.

PandoDaily contributor Kevin Kelleher wrote after the company's disastrous earnings report in October 2012 that "The Motorola acquisition is — no surprise — weighing down the company’s performance. Beyond a rich patent portfolio, it’s still not clear what Motorola offers Google." Motorola Mobility "is a brick weighing down the company" that weakened investor enthusiasm, he continued.

Part of the problem with the Motorola Mobility acquisition was Google's seeming reticence to fold the company into itself. The company has said before that it doesn't want Android OEMs to think that Motorola Mobility will get preferential treatment, and that it would be treated as any other third-party manufacturer would so far as Android releases and participation in the Nexus program are concerned.

Google CFO Patrick Pichette acknowledged concerns about the Motorola Mobility acquisition at the Morgan Stanley Technology Conference in February. The Motorola Mobility products released after Google acquired the company were "not really to the standards that what Google would say is wow — innovative, transformative," he said.

"We've inherited 18 months of pipeline that we actually have to drain right now, while we're actually building the next wave of innovation and product lines," he said. "We have to go through this transition. These are not easy transitions."

Still, there is some hope for the company. News of a so-called X-Phone built by Motorola Mobility broke in December, and the Wall Street Journal claimed that the device would be released this year. This is the first Motorola Mobility-built device that Google is said to have put its weight behind, and it, along with the X-Tablet, could signal a change in Google's perception of the flailing hardware division.

Then there's the Wall Street Journal's last note on this morning's report, which says that

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.
This is markedly different from Google's public declarations of peace and love for Android OEMs, and likely what the tech press and investors have been waiting to hear since the Motorola Mobility acquisition was announced. Samsung has become the dominant player in the Android market, with analyst Horace Dediu writing that Samsung is "the only Android profit engine."

Google has taken its time with Motorola Mobility. But all of these reports, from the X-Phone and the "Motorola as insurance policy" thinking to all of the layoffs and Pichette's comments about the Motorola Mobility product pipeline failing to meet Google's standards, might indicate a future where Motorola Mobility is treated less like a tool or separate company and more like a part of Google.