Google’s (GOOG) attempt to bring Motorola back to profitability may have suffered a setback. With 1,000 of the 4,000 job cuts to take place in China itself, employees are up in arms to prevent the action.
To recap – Google entered into a definitive agreement with Motorola Mobility Holdings on August 15, 2011. The company picked up a 100% stake for $40.0 per share in cash, or a total consideration of approximately $12.5 billion. The deal, which closed in May 2012, was intended to beef up its portfolio of mobile patents. However, given that Motorola has many problems, Google recently announced major restructuring actions.
In China, R&D personnel will be halved and Motorola offices in Nanjing and Shanghai will be closed. The fact that the uproar is more on humanitarian grounds (pregnant women being informed on the phone, Chinese workers being paid a seventh of the severance compensation typically paid to an American) could mean that there is limited legal footing for the protests. Indeed, Google representatives have stated that the requisite permission from the trade union has been received and the paper work is in order.
It is interesting to note that Google has had a tough time in China with the Chinese government practically pushing it out of the country. Google has retained a toe-hold and left its Android-powered devices to do the rest.
In the second quarter of 2012, Google did very well with its gross revenue touching a record $12.21 billion. Revenues from both Google-owned and partner sites continued to grow in double digits on a year-over-year basis.Google retains a Zacks #3 Rank, which translates to a short-term ‘Hold’ recommendation.
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