Qualcomm to cut 4,700 jobs to save $1.4 billion

Wireless chip vendor Qualcomm will cut its workforce by 15 percent or nearly 4,700 of the 31,300 employees in a bid to reduce costs by $1.4 billion.

The decision to cut jobs follows a 14 percent drop in revenue to $5.8 billion in Q3 fiscal 2015 and 47 percent dip in net income to $1.2 billion.

Qualcomm job cut
# Significantly reduce temporary workforce
# Streamline engineering organization
# Increase mix of resources in lower-cost regions and reduce locations
# Invest in most differentiated technology areas

Qualcomm is facing pressure in China and Europe due to government level probes. On top of this, Qualcomm is facing marketing related challenges because smartphone users are looking for cost effective phones.

As a result, Qualcomm has cut its revenue expectations for 2015 to $24.5 billion to $25.5 billion against the earlier guidance of $25 billion to $27 billion. The company is also expecting a decline in device shipments to $253 billion – $259 billion from the prior estimate of $255 billion – $275 billion.

Qualcomm in a presentation said that it’s expecting 11-17 percent increase in 3G/4G device shipments to 1.52 billion – 1.6 billion units against 27 percent growth in 2014.
Global 3G 4G Device Shipment Estimates

Steve Mollenkopf, CEO of Qualcomm, said: “We are right-sizing our cost structure and focusing our investments around the highest return opportunities while reaffirming our intent to return significant capital to stockholders and refreshing our Board of Directors.”

Microsoft recently announced the elimination of 7,800 jobs – mainly from its Nokia phone business unit.

The San Diego-based chip company will add Mark McLaughlin, Tony Vinciquerra and an un-identified third person to the Board of Directors after finalizing agreement with JANA Partners, its shareholders.
Qualcomm opportunities
Qualcomm plans:
# Right-sizing the cost by eliminating $1.4 billion in spending, including a $300 million reduction in annual share-based compensation grants
# Reviewing alternatives to corporate and financial structure
# Reaffirming the plan to return significant capital to stockholders
# Adding new directors with complementary skills while reducing the average tenure of the Board of Directors
Aligning executive compensation with performance, including returns on investment
Disciplined investment in areas that further Qualcomm’s leadership positions

Qualcomm will be reducing its investments outside of QTL and QCT and will focus these investments around the highest-return opportunities, including data centers, small cells and certain IoE verticals.

The company will also review its present corporate structure. There were news reports that Qualcomm could split into two.

“We have tremendous advantages and IP leadership, and we are very well positioned to capitalize on the significant long-term opportunities before us as mobile computing dramatically expands beyond the smartphone,” Mollenkopf said.

Baburajan K
[email protected]