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Motorola is turning into a rotting albatross around Google’s neck

Published Jul 18th, 2013 5:10PM EDT
Google Earnings Analysis Q2 2013

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The albatross was a sacred animal to old mariners. The punishment for killing the big bird on a sailing ship was having to carry it around your neck until it rotted away. This may be a close analog to what Google must now suffer after the rash decision to buy the pride of Chicago a few years ago. Motorola’s non-GAAP operating losses exploded to $218 million per quarter during the spring period. Just a year ago, they were at the somewhat tolerable level of $49 million per quarter. Google is now staring at the possibility of bleeding a billion dollars per year thanks to its pet albatross.

Measured on GAAP basis, operating losses related to Motorola have already ballooned past $300 million per quarter. Restructuring charges still top $80 million per quarter years after the acquisition was finalized. All in all, Motorola’s GAAP operating margins are now a negative -34%. This puts into certain context the market focus on whether Nokia’s handset operating margins are -2% or +1%.

As a matter of fact, it carries a whiff of nostalgia.

Back in 2007, phone industry people followed with stunned fascination as Motorola’s handset margins swung tens of percentage points into the crimson. We now face the old -07 betting pool scenario: Could GAAP margins really hit the negative -40% mark?

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to TheStreet.com, Forbes and Business 2.0 Magazine in addition to BGR.