Google’s Moto to be Leaner and Meaner
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Being in Red, with a figure of $233 million, for the first six weeks under Google (NASDAQ: GOOG), Motorola Mobility is to be reinvented by the search engine behemoth. Moto’s phone business has been unprofitable for 14 of the last 16 quarters. To begin with the reinvention, Google has decided to lay off 20 percent of the workforce of Motorola Mobility and shut down a third of its 94 offices worldwide.
Two third of the 4,000 jobs to be cut will be from outside the United States, the company said in a filing with the U.S. Securities and Exchange Commission dated August 3. The company plans to leave unprofitable markets and shrink its operations in Asia and India. Google also let go 40 percent of Moto Mobility’s Vice presidents and hired new senior executives.
A major reason why Google bought Motorola was for its 17,000 patents, but then Google is also interested in launching its own range of smart devices. Motorola’s extensive experience in the cell phone and touch screen market would definitely help Google in their future plans. Hence going forward Google wants Moto to concentrate on few innovative and profitable devices rather than on low-end devices.
However the big question here is “Can Google succeed in the brutally competitive, low margin cell phone business?” Around Ninety percent of the cell phone market is captured by the smartphone giants Apple (NASDAQ: AAPL) and Samsung. The remaining 10 percent is being shared by Motorola, RIM (NASDAQ: BBRY), LG, Nokia, etc. Apple’s iDevices along with the magnificent iOS has been ruling the customer’s heart for a long time now. Samsung, being the largest Android smartphone manufacturer, enjoys popularity in the international market. Blackberry, from Research in Motion (RIM), still enjoys a sweet spot in the mobile enterprise business market. With the possibility for Samsung and RIM to tie-up, it would be even more difficult for Google and Moto to compete against the stalwarts.
Dennis Woodside, Motorola’s new chief executive, also said that they plan to cut the number of devices Motorola makes every year. He says the company will emphasize on making innovative products which includes sensors that could recognize the people in the room based on their voices, cameras that would take sharper images and batteries that would last for days.
Google has created a Silicon Valley style startup and recruited Regina Dugan from the Pentagon’s Defense Advanced Research Projects Agency, or Darpa, to run it. This startup will be involved in the advanced research and development to foster innovation for the future Moto smartphones.
Ms. Dugan is hiring metal scientists, acoustics engineers and artificial intelligence experts who will work only for two years with her so they feel a sense of urgency. This was an idea she borrowed from Darpa, where people wear their resignation date on their name tags.
The times are changing and now every software company wants to launch its own hardware. Apple has been doing this for ages with products like the Mac series and the iDevices. To some extent this did work for Apple.
Microsoft (NASDAQ: MSFT) is also coming out with its own ‘Surface’ tablet which will run on the latest Windows 8 pro and Windows RT Operating Systems. This move did cause some pain to the hardware partners of Microsoft to the extent that the partners are even considering a tie up with other software providers.
With Google launching the Nexus Tab and now planning to come out with its own smartphone, the hardware partners of Google may also start feeling insecure and eventually drift away from Android.
So, will Google’s mobile products survive in the highly competitive market? Will the new strategies generate sales for Moto devices? Will Google succeed in luring more customers to use its services with the new Moto smartphones? What happens if the hardware partners move away from Android? Will the highly fragmented Android market still survive?
We don’t have answers to these questions. Only future will tell. So let’s wait and watch.
If you have any thoughts on the future of Google’s products feel free to leave your comments below.
shinerulz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.