One large reason why Google’s earnings fell dramatically this quarter can be summed up in a word: Motorola.
Sure, Google wanted Motorola badly—to the tune of $12.5 billion—for its patents, but Mountain View is now responsible for a lot more. Collectively, in Q3 2012, Motorola lost $527 million ($505 million in the mobile segment alone). The rest of Google, meanwhile, took in $3.26 billion. So, accounting for Motorola’s half-billion dollar quarterly loss, the company as a whole made $2.74 billion in income, down from $3.07 billion a year ago.
"We’re really pleased with Motorola’s progress in its 150 days," said Patrick Pichette, Google's chief financial officer, in the company's scheduled earnings call on Thursday. "We’re just at the beginning of the Google and Motorola story."
In other words, Google has struggled to fully integrate Motorola’s business into its own—granted, it has only had one full quarter to do so. Just earlier this month, Google said in a filing with the Securities and Exchange Commission that it would be laying off workers outside the United States in addition to the 4,000 job cuts it announced in late August.
However, analysts say that despite the stock slide, Motorola still remains a relatively small part of the company, and that this may just be a short-term bump in the road.
Motorola "not a major consideration," analysts say
"Motorola details are not a major consideration for investors in Google," Brian Weiser, an analyst at Pivotal Research Group, told Ars.
"The company provides such minimal disclosure (and is unlikely to improve on that front, such that it would be impossible to tell how, if at all, it would impact the company) and at any rate, is more likely than not simply tidying the manufacturing business up for a sale that it’s not worth paying much attention to given the relative scale of the rest of Google’s business."
He added that Google has also said that it plans on trimming down the company and selling off parts of it. In late August, various media outlets reported that Google was in the early stages of trying to sell the Motorola Home Business unit to the tune of $2 billion.
"[Google has] been less explicit in their thoughts beyond that, but it appears that the manufacturing business is best viewed as an option for Google," he added. "Under all circumstances they want to turn it around from a product development and profitability perspective. If by the time they have turned it around it happens to be strategic to hold on to the business, they will."
Ben Schachter, an analyst with the Macquarie Group, told Ars that focusing in on Android-powered devices is likely the future of Motorola within Google.
"As for the Motorola integration, it is clear that while the patents were important, they were not the only factor in the acquisition," Ben Schachter, an analyst with the Macquarie Group, told Ars. "We expect Google to meaningfully scale down the size of Motorola while focusing on fewer (but higher-end) products—not only phones, but tablets and other Internet connected devices."
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