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Google raises estimate on Motorola restructuring cost

Thu, 10/04/2012 - 12:54pm
Maisie Ramsay, Wireless Week

Overhauling Motorola Mobility is proving more expensive than expected for its new parent company, Google.

The Internet search giant has increased its previous estimate on the cost of Motorola's restructuring to $300 million and warned it could take an additional $40 million hit as it closes facilities and lays off workers.

Google also said it may incur "significant" additional costs beyond those specified in its latest SEC filing.

"Motorola continues to evaluate its plans and further restructuring actions may occur, which may cause Google to incur additional restructuring charges, some of which may be significant," it said.

The restructuring was expected to cost no more than $275 million when Google announced the plan in August.

Google said it planned to lay off 4,000 Motorola employees and close about one-third of its facilities. Two-thirds of the cuts were slated for Motorola's international staff, with the remainder slated for U.S. workers. Google also said it planned to shift Motorola's product portfolio away from feature phones "to more innovative and profitable devices."

The changes were designed to return Motorola to profitability after losing money in all but two of the past 16 quarters. At the time, Google cautioned there could be additional restructuring charges.

Google paid $12.5 billion to purchase Motorola, closing the transaction in May. The price tag for the handset manufacturer included $2.6 billion of goodwill value it said would come from "synergies expected to arise after the acquisition." Motorola lost $233 million last quarter, a drop in the bucket for Google’s $2.8 billion profits.

By acquiring Motorola, Google gained control of a key manufacturer of Android smartphones and a portfolio of patents to protect the operating system, which has been the subject of multiple intellectual property lawsuits by competitors including Apple and Microsoft.

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