Internet behemoth Google, Inc announced on Monday that it was cutting 4,000 people from the workforce of Motorola Mobility. The job cuts amount to nearly 20% of the entire workforce at Motorola Mobility.
The cuts are also the largest that Google has made since its inception. Nevertheless, shares of Google increased by 3% after the news was released. Analysts however are not completely convinced that the job cuts will be enough for Motorola Mobility to right its fortunes. The cell phone maker has not launched a hit in the smartphone market since 2004 when it released the Razr, the well received flip-phone.
Google purchased Motorola Mobility in 2011 for nearly $12.5 billion. At the time, Motorola Mobility was losing money. The acquisition by Google was the largest it has made as a company. The acquisition was made so Google could use the many patents that Motorola Mobility possesses to help with legal attacks over its Android platform and to diversify into other sectors from just its successful software business.
A number of analysts believe that Google has a better chance of challenging Apple and its popular iPhone by bringing together its software from Android and the Motorola Mobility hardware from its smartphone business.
Wall Street however, has raised concerns over the Motorola Mobility acquisition saying that some investors have begun to worry that the world’s largest search engine has entered into unchartered waters for them and into a sector known for very low profit margins.
Motorola Mobility has only reported profits in 2 of its last 16 quarterly reports. During the recently ended quarter, the company said it lost $233 million based on revenue of $1.25 billion.