Hire Wire Aug 18 2011

Can Motorola Folks Become Googlers?

By joseph walker

Google is in unchartered waters with its acquisition of Motorola Mobility Holdings and its 19,000 employees, which would increase its global workforce by 66% upon completion of the deal. Like any ship in choppy seas, the rookie sailors are most at risk.

In typical mergers, the acquiring company is expected to lay off people in duplicate positions. Google, a software company, and Motorola, a manufacturer, are on opposite ends of the technology spectrum, so the usual rules may not apply.

"Because Motorola is in such a different industry, Google won't be comfortable coming in and taking control of the manufacturing operations and handset design; it's just not their core competency so they have to leave Motorola virtually intact," said Kerry Rice, an Internet analyst who covers Google at Needham Company.

The jobs of most Motorola employees are safe, analysts said, and it's even possible they may get some Google benefits such as lavish perks and above-market salary compensation.

In the short-term, analysts said, Google will keep to its word of maintaining Motorola as a separate entity and layoffs will be few and far between. For Motorola employees, that may mean they will eventually get a taste of the lavish perks that Googlers are known to enjoy.

"One scenario is that Google is telling the truth and they run it as a separate company with a better parent company and more capital, and employment goes up, and there is even room for perks and salary growth," said Matthew Thornton, a senior analyst at Avian Securities, LLC, who covers telecommunications. In a blog post announcing the merger, CEO Larry Page wrote, "we will run Motorola as a separate business."

Motorola did not respond to requests for comment.

Some Motorola employees fear layoffs and are selling their stock, assuming that the company's share price, which jumped 56% on the announcement Monday, won't go higher soon, said one employee at the company's Libertyville, Ill., headquarters. Others hope Google will accelerate the transformation of the company's sluggish corporate culture that began under CEO Sanjay Jha. Many hope to call themselves Googlers someday soon, said the employee, a software engineer.

Motorola will host a "town hall" meeting for its employees next week to answer questions about the merger, according to a memo sent to employees by Jha after the merger announcement.

Since Jha was hired from Qualcomm Inc. in 2008, Motorola's mobile phone business has undergone many painful re-organizations, including thousands of layoffs, and more mundane cost-cutting measures such as moving office e-mail and word processing from Microsoft Office and Exchange to Google Apps.

While the 83-year-old company has been badly wounded by the company's missteps and failures in the mobile market, Jha's reforms have helped re-build morale, said Thornton, the Avian Securities analyst.

"I think the Silicon Valley culture has crept in there and I think there's a renewed sense of pride," Thornton said of Motorola. "It's been a painful process, but it's a place where people want to work."

The downsizing of the last few years may also help protect the company's remaining employees, said Mark McKechnie, a telecom equipment analyst at ThinkEquity LLC. "Motorola was a fairly lean operation. They were on the razor's edge of being profitable," he said. Motorola lost $56 million in its most recent quarter.

Other scenarios that could play out include Google selling the hardware components of Motorola, keeping only the patent portfolio it needs to protect its Android operating system. If Google couldn't find a buyer for the hardware business, it could close operations and sell manufacturing facilities. In that case, many employees would lose their jobs, Thornton said.

Most analysts agree that significant changes won't occur for Motorola employees for at least two years. "It's really six months until the deal goes through, then six months of absorbing the company, so it's two years before you see impact and influence on Motorola and its operations," said Clayton Moran, a senior analyst at Benchmark Company covering Google.

What Google does with Motorola will have less to do with acquisition's 19,000 employees and more to do with Google's long-term business interests, said Gene Munster, a senior research analyst at PiperJaffray who covers Google. Having a hand in designing handsets will take a backseat to preserving the Android "ecosystem" in which many companies all have free access to the mobile operating system, Munster said.

Write to Joseph Walker at Joseph.Walker@dowjones.com



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