Motorola to slash 500 jobs in Chicago, 25% of its workforce there

Lenovo's Motorola Mobility unit is cutting 500 jobs at its Chicago headquarters, or 25 percent of its Chicago-based workforce, as part of a broader restructuring and layoffs at its parent company. The cuts come after Motorola moved to Chicago's Merchandise Mart area in April 2014 after years of maintaining a headquarters in Libertyville, Ill.

The layoffs started Thursday in Chicago and will continue for the next few weeks, Motorola Mobility spokesman William Moss told the Chicago Tribune. He said the Merchandise Mart headquarters space would likely be affected, though operations would remain there.

"We will maintain a substantial employee base there, as well as our labs and design facilities," Moss told Crain's Chicago Business. He said the cuts are affecting all functions and departments at Motorola.

Chicago, with a little under 2,000 employees, is Motorola Mobility's largest facility by headcount, according to Crain's. Motorola had around 3,500 workers worldwide when Lenovo bought it from Google (NASDAQ: GOOG) last year for $2.9 billion. "Chicago is not as badly impacted as some of our other sites," Moss said, though he declined to detail job cuts at other sites.

"A situation like this is going to be difficult and painful regardless of the office you are in," Moss told the Tribune. "That said, that is our home now and will continue to be, and that's important to us."

Lenovo said yesterday it is going to cut 3,200 jobs in its non-manufacturing workforce around the world. That equates to about 10 percent of its non-manufacturing headcount and about 5 percent of the company's total workforce of 60,000 people.

Lenovo said second-quarter sales in its mobile group were $2.1 billion in the calendar second quarter, up 33 percent year-over-year, due to the inclusion of revenues from Motorola. Motorola contributed $1.2 billion to Lenovo's mobile revenues. However, the mobile group also posted a pre-tax loss of $292 million, compared to a loss of $9 million in the year-ago period, when Motorola was not yet part of Lenovo.  

Motorola's contribution to Lenovo's smartphone shipments came in at 5.9 million units in the second quarter, which was a 31 percent year-over-year decline

Lenovo is going to restructure its mobile business group to "align smartphone development, production and manufacturing and better leverage the complementary strengths of Lenovo and Motorola." The company plans to offer a more simplified and streamlined product portfolio, with fewer, more clearly differentiated models.

"A faster, leaner business model will better leverage Lenovo's global sales force and accelerate the efficiency actions already underway in its global supply chain," Lenovo said, adding that the mobile group "will continue to drive the overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products."

IDC analyst Ramon Llamas told the Tribune that he does not think the cuts reflect a lack of confidence in Motorola but rather an overall desire by Lenovo to consolidate responsibilities and increase efficiency. He added that Motorola's push to make high-quality, low-cost smartphones is a wise move considering carriers are shifting away from two-year contracts and subsidizing phones.

Indeed, late last month Motorola introduced a trio of new smartphones, including two intended for the U.S. market, and the company is embracing the direct-to-consumer route. The company's new Moto G sells for $180 unlocked and its higher-end Moto X Pure Edition will be around $400 when it goes on sale in September.

For more:
- see this Crain's Chicago Business article
- see this Chicago Tribune article
- see this AP article

Related articles:
Lenovo, HTC to slash jobs as Android smartphone makers struggle
Analysts: Smartphone growth slows to around 15% in Q2 thanks to weaker growth in U.S., China
Motorola embraces direct-to-consumer model with new Moto G, Moto X phones
Lenovo's mobile chief steps down amid slowdown in Chinese smartphone market
Amid slowdown in China, Lenovo notches 18.7M global smartphone shipments in Q1

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