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Motorola drags down Google's quarter

Despite restructuring, the unit's losses increased in Q4 as new parent waits for new product strategy to kick in


Published: 23 January, 2013

READ MORE: Financial | Google | Applications (Search) | Handset | Android

Amid a generally strong set of fourth quarter results, Google's Motorola subsidiary was a dark spot, posting a loss of $353m ($152m excluding one-time items) and dragging its parent down. Despite recent restructuring, the net loss had grown from the year-ago figure of $80m - when Motorola was still independent - while revenue had fallen to $1.51bn from $3.4bn then. The results were affected by Google's decision last month to sell Motorola's home set-top box business to Arris Group - as a result of that planned sale, the search giant moved the results to its discontinued business section.

In addition to the Arris deal, Google has been slimming down its handset unit and seems set on turning it into a center of innovation and a few high end devices, rather than a full-blown cellphone provider, perhaps to minimize the conflicts with larger Android partners, notably Samsung - increasingly dominant in the Google platform, and also an important Nexus vendor. While LG, Asustek and others are also making co-branded gadgets for the Nexus line-up, which is currently Google's most significant hardware activity, Motorola has not been invited to the party.

Despite all the cuts, Google CFO Patrick Pichette warned that results from Motorola would continue to be "variable" as it works through the reorganization process and continues to write down intangible assets. He said the firm is still working through a product pipeline of 12-18 months before Google's "reinvented" device strategy fully kicks in under Dennis Woodside, now in charge of the handset unit. However, while Google CEO Larry Page stressed the new approach to product development as he tried to look positive about Motorola, Pichette insisted the subsidiary was not set to become merely an R&D hub but would make a profit in time. The search firm "isn't in the business of losing money with Motorola", he commented.

Overall, Google's profit topped analysts' estimates on strong advertising spend. Its Q412 profit, , excluding certain items, rose to $10.65 a share, ahead of Wall Street forecasts of $10.50, even though its advertising is shifting to the mobile platform, where rates can be about 55% less than on PCs. However, Google slowed the pace of decline in cost-per-click, which fell 6% in the quarter, compared to 15% in Q312. Jordan Rohan of Stifel Nicolaus said: "Google continues to monetize its searches very well." Revenue, excluding sales passed on to partner sites, rose 39% year-on-year percent to $12.2bn and sales from operations, excluding the Motorola set-top box unit, rose 36% to $14.4bn.

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