Google's headache: After patents, what to do now with Motorola?

Google's headache: After patents, what to do now with Motorola?

Summary: Google's move to slash and burn 4,000 jobs worldwide is more about the search giant's move to return Motorola Mobility to profitability, months after Google engorged itself on 17,000 patents.

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TOPICS: Google, Legal, Patents
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It's no longer about the patents, but the post-honeymoon period is giving Google one heck of a headache. 

Motorola-Mobility-and-google-logo_610x458

There's no doubt that Motorola Mobility's vast portfolio of 17,000 patents will stand Google in good stead over the ongoing litigation with Apple, but it's clear that other factors are now taking priority.

Google's move to shuffle up its dedicated smartphone-making unit should come as no surprise. "[Motorola Mobility] lost money in fourteen of the last sixteen quarters," says an 8-K filing with the U.S. Securities and Exchange Commission. Google also warned that investors should expect to see "significant revenue variability" from the company in the coming quarters.

In a nutshell, Motorola isn't turning a profit, and now Google has its patent treasure trove, it doesn't want to lose out in the long run.

Earlier this year, Google's executive chairman Eric Schmidt told investors that the Motorola sale was "...for the sum of patents, products, the people, and the innovation," in a move to push the press and investors away from thinking the sale was all about the patents.

Google chief executive Larry Page had a different take, ZDNet editor-in-chief Larry Dignan wrote earlier this year:

If you consider that Google was going to pay nearly $4 billion for Nortel's 6,000 wireless patents, $12.5 billion for Motorola Mobility doesn't look like a big chunk of change. With Motorola Mobility's patents, Google can fend off lawsuits. In other words, Google builds out its patent portfolio. 

Yeah, it was about the patents. But now it's not, and Google has to ruffle some features and shuffle Motorola Mobility in order for it to generate profit in the long term.

Motorola Mobility's first-quarter earnings showed a loss of $86 million, more than its $81 million loss in the same quarter a year ago. 

To make matters worse, the 8-K filing says:

"Google expects to incur a severance-related charge of no greater than $275 million, which it believes will be largely recognized in the third quarter, with the remaining severance-related costs recognized by the end of 2012."

That's close to four-times the loss it made in the first quarter. The search giant warns that "Although [Google] cannot currently predict the amount of these other charges at this time, these additional charges could be significant."

In other words: it's going to get worse for Google before it gets better. 

Perhaps at first, Motorola Mobility looked like a perfectly valid buy for the patents, but now it isn't. The aftershock of buying the profit-losing company is taking its toll on Google. There's little point in having a company that doesn't turn a profit, so in doing so, Google has wiped the patent factor off the sale and is now focusing on the business itself.

Whether or not the patents were a bonus or a primary reason to buy Motorola, it doesn't matter. What Google has left is a vast number of patents it can fire back at Apple et al with, and a smartphone-making unit it can revamp and target the general consumer market, and the BYOD enterprise culture with.

The plan is for Google to "shift the emphasis from feature phones to more innovative and profitable devices." Cut away the fat from the lower-end devices it ships out and concentrate its efforts on fewer, more profitable phones -- like... Apple? Ring any bells?

Patents first, the rest after. For Google, despite Motorola Mobility's problems, it's still a good buy for the price it bought it at.

Topics: Google, Legal, Patents

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  • Google doesn't care

    What to do next with Motorola?

    Google has already revealed its intentions by burning 4,000 jobs so early and so readily. The corporation couldn't care less about Motorola or its staff. A lot of people have just learned the hard way that, sometimes, being a Google employee really sucks.
    Tim Acheson
    • correction

      being a FORMER Google employee really sucks.
      SciZDNet
    • They were never google employees. google made sure of that.

      they never got the perks and benefits that google employees got and the ones that are still there never will.
      Johnny Vegas
    • I wonder why....

      ...people usually don't criticize Google? It's always bash Microsoft, bash RIM, etc, but why not bash Google? After all they steal your information. And yes they're in it for the money just like any other for profit business.
      mikroland2.0
      • seriously?

        How are they stealing your information when you voluntarily use google to search or gmail. The information they extract are depending on you being logged into your google account. Otherwise its all anonymous data. And what super uber important thing are you deluding yourself into thinking that you are doing that you wouldn't want anyone to know? Cheating on your spouse doesn't count as important.
        rengek
        • Don't disagree on the consent angle (in most cases)

          but, as to the "what super uber important thing are you deluding yourself into thinking that you are doing that you wouldn't want anyone to know?"

          I love this argument. I'm not necessarily doing anything I'd be embarassed if it was disclosed, and certainly nothing illegal. That being said, I place high value on my privacy, and therefore do not take it lightly. And don't think governments worldwide aren't sitting there drooling over all the info that Google has in it's databases dreaming of ways to get their hands on it. Our government has already broken down any remaining walls between themselves and the telcos/ISPs, who do you think is next?

          And, Google is gradually building up a nice resume of "but I didn't know it was doing that" type defenses. At some point, you have to start to question either their competence or their honesty/integrity, as well as how much of your data you choose to entrust to them.
          TroyMcClure
        • re: Seriously

          They admitted to intentionally bypassing Safari security to collect data. I would call that stealing.
          jebailey1120
      • Stealing?

        It isn't stealing if you allow them to use your data when you agree to their EULA. So you open the door and watch someone walk out with your TV because you clicked "OK" without first reading the terms of service, and THEN call it stealing? Really? It's just agreeing to the Microsoft EULA, if Windows loses data or breaks any hardware it's not Microsoft's fault. We agree to this when we click "OK" to the EULA.

        Agree with Rush Limbaugh or not, he has it right when he says "Words mean things".
        benched42
      • "I wonder why.... ...people usually don't criticize Google?"

        You need to read more widely ... Google is the new Microsoft, as this thread reveals from post #1 onwards.

        Whoever took over Motorola would have to either close it, or rapidly restructure ... but that doesn't stop the Google bashers.

        But back to the topic ... I'm not sure what his point is ... Google were always going to restructure, and they were always going to head for top-end phones, to support Android. No great surprises there.

        The big question was never "What to do now" the question was always "How to rebuild a sad and tarnished brand" - Motorola has been well beyond its sell-by date for a long time, and I wish Google well in their attempts to refocus and rebuild a once-great and innovative brand.

        If they succeed, will that silence the Google bashers? Of course not :)
        Heenan73
    • You work for the government?

      That's the only place unproductive people can keep a job successfully...
      LarsDennert
      • Unproductive Gub-Mint workers

        Are you sure that you didn't mean "counter-productive" rather than "unproductive" ? We could use some LESS Gub-Mint. Maybe THEN....the Economy would get ROLLING again!
        56Wrecker
      • Ignoramus

        As a Government employee I get really tired of these comments from people who invariably have zero real knowledge of what Government staff do on a daily basis. Try juggling priorities that change daily because of politicians responding to lobbyists complaining about everything...like you...and setting new directions constantly. Try working with a budget that needs to be set 18 months before you know what you need to spend money on, constantly under the threat of outsourcing, and constantly attacked by ignorant people who don't appreciate the plethora of services that would no longer be available to you if we weren't here to provide them! Try walking a mile in my shoes before you spout another comment like that...
        dhuhtala@...
        • Government employees

          The Commercial world only has to think about one target - financial viability. Whether this is measured in shareholder value, profit, IP or physical assets, it's fairly simple. As dhuhtala points out, government has to be financially viable AS WELL AS responding to the whim of the politician (typically set by the lobbyists and if you are lucky by the people), national priorities (set by the regulators and if you think the commercial world has to respond to regulators, look at the banks; everyone does the absolute minimum), and be attractive to staff (government employs so many that it's a real challenge to fill the vacancies).
          It IS true that some government policy flies in the face of business, but this is set by the politicians, employees just have to enforce it. It IS true that some government employees are unproductive, but the same is true of a minority of employees in most organisations (and Motorola seems to be pretty good at threatening its own financial viability).
          Google employs outstanding people and rewards them well. Google sometimes acquires moderate to good or even average people, and Google has no place for these people and has to get rid of them. It's a fact of life.
          HugoM
        • sxo you agree???

          You have quite skilfully pointed out why the previous poster you labeled 'Ignoramus' was quite correct. Thank you.

          If you read quality guru Deming, you will find that when a single employee messes up, that employee's productivity drops. When a whole group of employees productivity drops, it indicates bad management. As you so aptly observed, the politicians at the top are often the problem.

          Having worked in both industry and government, I can tell you that industry is constantly striving to reduce overhead. Overhead can rapidly eat up all profits. In a large industry, anything less than 4X overhead is doing very good.

          Consultants consider anything less than 3X to be very good.

          4X means that any production worker needs to produce 4X his gross salary in order for the corporation to break even.

          Generally, 2X is required to cover benefits.

          Government on the other hand, is all overhead, so the multiplier can be as high as infinity. This doesn't mean that government is bad, just that it is never the most efficient means of doing anything.

          In the same vein, you may be doing something of vital importance to the whole nation, but what you are doing is adding nothing to the Gross National Product. OK, accept that.

          The bulk of computer folks in industry are all overhead too. If you don't manufacture, transport or sell product directly, then you are overhead.

          Most ZDNet posters can't accept that truth. I hope you can. Yes, government is overhead.
          YetAnotherBob
        • Cry me a river

          Did you mention anything on your list that doesn't also happen in the private sector? No you didn't. Did he say that ALL government employees are unproductive? No he didn't. I don't have to work for the government (know enough people that do) to know how much waste, redundancy and inefficiency there is in the public sector and if you can't see it than you are blind. Doesn't mean you are inefficient but your response is like it doesn't exist.
          non-biased
    • I bet they care.

      Every deal Motorola has made in the last 12 years has lost them more money, except for android smartphones. A caring person would cut away at Motorola with baleful intent. Motorola wasn't unproductive. It was self-destructive.
      tkejlboom
      • Android is has also lost money for MotoMob

        After all, since MotoMob started using Android they only had ONE quarter where they barely made it into the black. In other words, they they only had 3 months, where they managed to be EVEN (no real profits).

        The rest of the time, they have being in the red. Losing money every single quarter.
        wackoae
    • Motorola was already dead.

      Listen folks, most of the people that were/are going to be laid off would have been laid off anyway, at least now some of them will now survive where before everyone was more likely to be gone.
      balsover
    • shocking

      That a company getting merged into another company gets a staff trimming. Unheard of /sarc
      And another shocking surprise that a publicly traded company whose primary goal is money.
      rengek
  • Google's cash ocean

    Google is making 4,000 people redundant. meanwhile, the corporation takes a leisurely swim in its vast ocean of 50 BILLION DOLLARS in actual liquid CASH, and dabbles in "cool" lack--of-focus side-projects like their prototype robotic car.

    Google prefers to stand back and look at the vast ocean of cash it made from search, rather than actually doing something with it like investing in innovation -- as the co-founder of PayPal famously pointed out just recently.
    Tim Acheson