Google Thinks Less Is More for Motorola
After buying Motorola for its patents one year ago, Google has announced that it will cut 4,000 jobs and close one third of its 94 offices, hoping to turn the company around.
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When Google acquired the phone maker last August, the tech blogger world speculated that the $12.4 billion deal was about getting patent protection for its Android phones, which was partly true. About half of the price, $5.5 billion, was for "patents and developed technology" according to a regulatory filing released this past June. But post-patent grab, Google now has this big money-sucking phone company on its hands. Thus, plans have shifted to making money off of Motorola's phone business, which will no be easy since it has been in the red 14 of the last 16 quarters, according to The New York Times's Claire Cain Miller. To get there, Google has taken a less is more position.
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These job cuts, which amount to 20 percent of Motorola's total work force, are part of an effort to push Motorola to make fewer phones. The company will "stop making low-end devices and focus on a few cellphones instead of dozens," new Motorola CEO Dennis Woodside told Miller, a strategy that matches a Security and Exchange Commission filing, which said the company will "shift its emphasis from feature phones to more innovative and profitable devices." Until now, Motorola has put out new phone designs in bunches. On its website, it is showing 27 models, which is a lot more than Apple's offerings, which right now has three available choices. For more reasons than this, Apple has had a more successful phone-selling business than Motorola, but the fewer phones thing is at least one tangible aspect of their winning game. Other phone companies have noticed too. HTC, Sony, and RIM also recently announced cutting back on their new phone releases. (Apple sold 35.1 million phones in a "disappointing" last quarter, compared to the 5.3 million Motorola sold in last year's 4th quarter.)
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The idea is that Motorola will survive by making fewer, better phones, both saving money on its output and making more money on the limited selection it releases. Right now, Motorola spends too much on phone parts, Mark Randall — the "Tim Cook of Google" — told Miller. He wants the company to buy 50 percent fewer components. Of course, the company will also save money on the 4,000 people it no longer has to pay.
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But, it also thinks it can create more innovative products this way, which will draw in buyers the way Apple's iPhones have. "A lot of products that are roughly the same doesn’t drive the market to a new place," then Motorola CEO Sanjay Jha told AllThingsD's Ina Fried back in January, when the company first alluded to this "less is more" strategy. Last year, for example, Motorola released Droid Bionic and Droid Razr MAXX one after the other because of production delays with the Bionic. The Droid Razr sold well-ish, topping the charts at Verizon — but not at AT&T or Sprint. Meanwhile, RadioShack deemed the Bionic "unsellable." And the following quarter Motorola had lower than expected sales. The new way of doing things will limit these kinds of situations in which consumers are split between two similar devices, which aren't much different from their predecessors. The Razr Maxx, for example, was basically the same phone as the Razr, with better battery life. That doesn't give consumers much of a reason to upgrade.
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Apple has gotten its phone update timing down to a science, releasing a different enough product just in time for the last generation's phone contracts to end. Those who got the iPhone 4 in June of 2010 are just about due for a new iPhone 5 (or whatever it will be called), which is set to come out in Fall of 2012. Google wants to get its Motorola (and Android) buyers on this schedule, too.
