Google's purchase of Motorola Mobility in the spring of 2012 was a big deal. Hailed as "a watershed moment" for the company, the Motorola purchase was Google's biggest acquisition at the time. Some thought that it marked a transition for Google, from a search and advertising company to a consumer electronics manufacturer. Google put their president of the Americas region, Dennis Woodside, in charge of the company. As the new CEO, Woodside said:
"Our aim is simple. To focus Motorola Mobility's remarkable talent on fewer, bigger bets, and create wonderful devices that are used by people around the world."Advertisement
With the Motorola purchase, Google now had the ability to create devices that could compete with the likes of Samsung and HTC, as well as manufacturer their own tablets but, Google promised to keep a "firewall" between the two companies. As it turns out, the Motorola Mobility purchase has been a very costly one for them.
In an earnings call today, Google announced that Motorola Mobility has posted a loss of $342 million, as CNET is reporting. Revenue rose 18% year-over-year to $998 million, however, the loss is 75 percent higher than their last loss. The loss isn't hurting Google. The Mountain View company posted a second quarter profit of $3.23 billion.
Motorola is attempting to change direction and turn itself around. The new DROID Ultra, Maxx, and Mini will be released soon on Verizon. The Motorola X phone should be available on all four major U.S. cell phone carriers this fall. The loss is tied more directly to the investment that Google is making in manufacturing facilities for the Moto X phone. Building manufacturing facilities to build and ship customizable smartphones is not cheap. The new facilities in Fort Worth, Texas, will employ more than 2,000 people. There will also be a massive advertising campaign for the Moto X device, worth about a half a billion dollars. It's a huge bet on Google's part.
Google has already laid off over 5,000 employees in an effort to cut costs at Motorola Mobility. In the first quarter of 2013, the company employed 9,982 employees. At the end of the second quarter, the division only employed 4,599. Things should start improving quickly for Motorola Mobility. The Moto X phone is one of the most hyped phones this year, and could go on sale next month. Maybe Google will be turning a profit in no time.