The only way to describe what Google is doing to Motorola—it announced today that it’s firing an additional 1,200 Motorola employes on top of the 4,000 it recently laid off—is to imagine that the once-great mobile giant and industry pioneer is a building badly in need of renovation.
Google bought the property at a steep discount. Sure, $12.5 billion is a lot, but Motorola is in a good neighborhood—the exploding global market for mobile handsets—and has great curb appeal—an insanely valuable/dangerous patent portfolio covering practically every foundational innovation in mobile telecommunications.
But as an actual place to live or work, Motorola is in awful shape. There are pigeons in the rafters and no glass in the windows, and what little value the company has left amounts to just 1.7% of the global market for mobile devices.
For a long time Motorola tried to compete on the low end of the phone market, vying for the business of the world’s connected poor and emerging middle class, and mostly losing that battle to makers of commodity handsets. Now it is changing focus and aiming higher.
Google wants to tear out absolutely everything, starting with the employees whose skills are completely inappropriate for what will come next. In 12 to 18 months it will unveil new handsets designed by Google itself, rather than by whoever was left hanging on at Motorola around the time of the acquisition, perhaps including the mythical Google X Phone. In the meantime, Google has to stem the tide of red ink at Motorola, which is racking up a half billion dollars in losses every quarter.
Gut renovations are never easy. In essence, Google is trying to turn a 19th century factory into a block of luxury loft apartments. Google got the property it wanted, and now it has to show the world that it knows how to turn prime location and good bones into something high-end enough to attract the hippest customers.