UH-OH: The Company That Google Just Paid $12.5 Billion For Had An Awful Holiday

Larry Page

Motorola Mobility just issued an earnings warning, saying that holiday sales were much lower than expected.

That’s got to be a bummer for Google, which is in the process of trying to buy the company for more than $12 billion.

Motorola now expects $3.4 billion in sales and “modest profitability.” That’s flat from last year, and well below Wall Street’s expectations of $3.9 billion.

The company sold only 10.5 million mobile devices, which is DOWN from Q3 when it sold 11.6 million. That’s particularly bad news given that the holiday season is usually the best quarter for consumer electronics sales, like phones.

But at least more of those devices were higher-margin smartphones than last quarter — 5.3 million vs only 4.8 million in Q3.

The company blamed “the increased competitive environment in the Mobile Device business and higher legal costs associated with ongoing Intellectual Property (IP) litigations.”

In other words, blame Apple for releasing the iPhone 4S, dropping the price of the 3GS to zero, and for snarling Motorola in one of several patent infringement cases.

Motorola says it still expects the Google deal to close this quarter (“early 2012”), but reminds stockholders that the whole thing could still fall apart if regulators fail to approve it.