August 13, 2012, 4:38 PM — Google's decision to cut 20% of the workers from its Motorola Mobility unit re-ignited fears that Google was primarily after the 17,000 patents Motorola held when it was acquired in May.
"Everyone at Motorola is asking [if Google just wants its patents] and fearing the answer," said Jeff Kagan, an independent analyst. The 4,000 job cutsGoogle announced are "an earthquake up and down the hallways of Motorola Mobility. Google has never laid off workers like this before so this is also an unsettling feeling in the hallways of Google."
Indeed, a rich store of patents has become a kind of insurance policy for smartphone and tablet makers, as the recent buying up of patents by various parties and the Samsung-Apple court battle shows, analysts said.
Motorola previously announced its intention to cut back on the number of phone models it makes (there were 27 announced in 2011) to achieve greater efficiencies in a crowded smartphone market. The view was reiterated in a statement Motorola filed Monday with the Securities and Exchange Commission.
That SEC document states that the job cuts and other moves are "designed to return Motorola's mobile devices to profitability after it lost money in 14 of the last 16 quarters." Motorola will "simplify" its mobile product portfolio, shifting from feature phones to "more innovative and profitable devices," the statement said.
One source close to Google, who spoke on condition of not being identified, said the $12.5 billion that Google invested in Motorola is a long-term bet and a commitment to Motorola and to its smartphones and tablets. Reports that Motorola has created an Advanced Technology and Projects division with elite researchers bolsters the view that Google will have a continued interest in Motorola.
In addition to cutting 4,000 of about 20,000 workers, Motorola will close down or consolidate about one-third of its 90 facilities, the filing said.
The market seemed to like the job cuts and other moves. Google's stock price climbed 2.4% to $657.39 on the Nasdaq at mid-day Monday.