Google confirms laying off 20% of Motorola’s workforce will cost $275 million

In a regulatory filing with the SEC, Google today confirmed news reports of mass lay-offs at Motorola Mobility. About 4,000 of its 20,000 employees will be let go, a third of them from the US. Google estimates that the move will cost the company $275 million, most of which will be realized in the third quarter. Motorola has delivered 14 quarters of losses in the last 16 and Google believes the latest step would ensure the unit starts making money soon. Read on for the complete statement.

On August 3, 2012, Motorola Mobility (Motorola), a wholly owned subsidiary of Google Inc. (Google), determined that it would reduce its headcount by approximately 4,000 out of a total of about 20,000 employees. Two-thirds of the reduction is set to occur outside of the U.S. In addition, Motorola plans to close or consolidate about one-third of its 90 facilities, as well as simplify its mobile product portfolio—shifting the emphasis from feature phones to more innovative and profitable devices.
These changes are designed to return Motorola’s mobile devices unit to profitability, after it lost money in fourteen of the last sixteen quarters. That said, investors should expect to see significant revenue variability for Motorola for several quarters. While lower expenses are likely to lag the immediate negative impact to revenue, Google sees these actions as a key step for Motorola to achieve sustainable profitability.
Motorola understands how hard these changes will be for the employees concerned and is committed to helping them through this difficult transition. Motorola will be providing generous severance packages, as well as outplacement services to help the employees find new jobs. 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. Google also expects to incur other restructuring charges related to the actions described above, the majority of which will be recognized in the third quarter. Although Google cannot currently predict the amount of these other charges at this time, these additional charges could be significant.