Google Completes Motorola Deal

The Google rumors come during a turbulent year for businesses attached to the current cable TV business model.

The Google rumors come during a turbulent year for businesses attached to the current cable TV business model.

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"This gives Google a chance to develop and showcase a 'next generation' device for mobile computing," said N. Venkat Venkatraman, a Boston University professor specializing in technology and management. "But it could also create a complex issue for Google. How do you balance the desire to create something that consumers love without upsetting the rest of the Android ecosystem?"

Milanesi suspects Google might also try to design a Motorola smartphone that caters to the needs of companies and government agencies.

"Like almost everything Google does, I think they will try a lot of different things and then do whatever is best for them," Milanesi said.

Signaling its intention to experiment, Google said it has created an "advanced technology and projects group" at Motorola. It will be run by Regina Dugan, a former director of the U.S. Defense Advanced Research Projects Agency, or DARPA, which specializes in coming up with national security innovations. DARPA was how the Internet got its start more than four decades ago.

In a statement Tuesday, Motorola spokeswoman Jennifer Weyrauch-Erickson said the plan under Google's ownership is to make "fewer, but bigger launches." She said Woodside wasn't available for an interview.

Motorola's cable-TV boxes could provide Google with a springboard for delivering more of its services, including advertising, to living rooms. However, cable companies control the market for set-top boxes, and they resist any intrusion into their realm.

Google also will likely have to do some hand-holding with investors who have been worried about Motorola's troubles eroding Google's hefty profit margins.

"If it looks like Motorola is just a lab or toy for Google, investors are going to be asking themselves whether the company is spreading itself too thin," Venkatraman said.

As its line of smartphones has waned in popularity, Motorola has suffered losses totaling $1.7 billion during the past three years. Google has earned $25 billion over the same stretch.

Page already has decided to operate Motorola separately partly because of the contrasting fortunes of the two companies. That will make it easier for investors to track how the different lines of business are faring. For now, Motorola will continue to have its headquarters in Libertyville, Ill., far from Google's Silicon Valley home in Mountain View, Calif.

Google shares fell $13.17 or more than 2 percent, to close Tuesday at $600.94.

Turning around Motorola will likely require layoffs, a painful process that belies Google's carefully cultivated image as a cuddly employer.

Google laid off about 300 people in 2008 after it paid $3.2 billion to acquire online advertising service DoubleClick Inc., which was previously the biggest deal in the company's history. The cutbacks represented about one-quarter of the workforce that Google inherited from DoubleClick. If Google imposes a similar reduction on Motorola's 20,500-employee payroll, it would translate into about 5,000 layoffs.

Taking on so many new employees also raises the risk of cultural clashes with the 33,000 people already working at Google.

Motorola Mobility is one half of the old Motorola Inc. It split at the beginning of last year. The other half, Motorola Solutions Inc., is still independent. It sells police radios, barcode scanners and other products aimed at government and corporate customers.

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AP Technology Writer Peter Svensson in New York contributed to this story.

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