The Joplin Globe, Joplin, MO

Business

August 13, 2012

Motorola Mobility to cut 20 percent of workforce

CHICAGO — Smartphone maker Motorola Mobility is laying off 20 percent of its 20,000-strong global workforce, affecting 4,000 employees worldwide, Google Inc. disclosed Monday in a filing with the Securities and Exchange Commission.

The Mountain View, Calif.-based search giant acquired Libertyville, Ill.-based Motorola Mobility in May for $12.4 billion.

In its regulatory filing, Google said Motorola Mobility also plans to “close or consolidate” about one-third of its 90 facilities worldwide and simplify its smartphone portfolio to focus on “more innovative and profitable devices” instead of lower-end feature phones. Dennis Woodside, the chief executive of Motorola Mobility, had hinted at this product strategy when he took over from Sanjay Jha in May, saying he wanted to focus on “fewer, bigger bets.”

The restructuring is aimed at restoring profitability at Motorola Mobility, Google said, noting that the company has lost money in 14 of the last 16 quarters. The filing warned that Motorola Mobility would show “significant revenue variability for several quarters.” The turnaround efforts are aimed primarily at the mobile devices division; Motorola Mobility’s other business segment makes cable TV set-top boxes, and those operations are concentrated in Horsham, Pa.

The company is in the process of notifying the workers who will lose their jobs, a process that will continue through mid-week. Google said Motorola Mobility will be “providing generous severance packages” to affected employees. Google also said it expects to take a severance charge of about $275 million, most of which will hit in the third quarter. Additional charges related to the restructuring will also be recognized during that quarter and “could be significant,” the filing said.

The disclosure comes less than one month after Motorola Mobility and Chicago Mayor Rahm Emanuel made a high-profile announcement about the company moving its headquarters and 3,000 employees from Libertyville to Chicago in 2013. The company is laying off about 700 employees in the Chicago area, representing about 23 percent of its local workforce.

“I’m very sensitive to the individuals and their families - and that’s hard,” Emanuel said in a phone interview.

But the mayor said the timing of the layoff announcement is not an embarrassment for his administration or a setback in efforts to build a tech hub downtown.

“Based on every call we’re getting from companies and venture capitalists, the (planned move) is a big deal,” Emanuel said. “Chicago is now becoming a tech capital.”

The mayor added that “when Google bought Motorola Mobility (in May), we knew things would not go along as they had in the past, that Google would bring new focus and restructuring to the business.”

Emanuel’s office noted the company is still making a $300 million commitment to Chicago, including the cost of leasing four floors of office space for 15 years.

“We expect them to create thousands of jobs in Chicago over time,” Tom Alexander, a spokesman for the mayor, said in an email. “This is a change to get the company moving in the right direction, but this is a long-term relationship and we’re looking forward to many years of job growth, innovation and advancement from the company.”

Last year, Motorola Mobility agreed to retain a local workforce of 2,500 and make $600 million in investments in exchange for tax credits of more than $10 million a year for 10 years. The layoffs announced on Monday will drop the company’s Chicago-area workforce below the 2,500-worker threshold needed to qualify for state incentives, Motorola Mobility spokeswoman Jennifer Erickson said.

Those incentives “will be suspended until we have at least 2,500 again,” she said.

 

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