Qualcomm announces job cuts in huge restructure as revenues decline

During its quarterly financial results call, Qualcomm announced a huge organisational reshuffle and a 15% reduction in its workforce.

In response to fiscal third quarter results which left it reeling from a 14% reduction in revenue year-on-year from $6.8bn to $5.8bn, as well as a 47% reduction in net income YOY from $2.2bn to $1.2bn, Qualcomm’s executive team announced sweeping changes to the organisational structure of the chip maker. The changes will feature a considerable reduction in its workforce, with roughly 4,500 jobs set to be cut.

The conference call for press hosted by Qualcomm featured a lot of euphemising, with CEO Steve Mollenkopf initially announcing the broad-scale changes as “fundamental changes to position Qualcomm for improved execution, financial and operating performance”.

Mollenkopf then went on to explain the steps being taken, and that while aggressive, they are apparently in the long term interest of Qualcomm as a whole.

“Our strategic realignment plan is designed to enable us to extend our core strengths and deliver value for our customers and stockholders in more efficient and powerful ways,” he said.

“The plan has six key initiatives: number one, aggressively right-sizing our cost structure; number two, reviewing financial and structural alternatives that are available to us that may create stockholder value; number three, reaffirming our intent to return significant capital to stockholders; number four, adding new directors with complementary skill sets while reducing the average tenure of our board; number five, further aligning executive compensation with performance and stockholder return objectives; and number six, making disciplined investments to further our leadership positions and build upon our core technologies and capabilities.”

While job cuts, which will affect 15% of Qualcomm’s 31,000 employees, weren’t specifically identified as one of the aforementioned steps being taken by Mollenkopf; a statement released by Qualcomm did say one of the “targeted reductions” of $1.1bn in annual cost would include “reductions in headcount and temporary workforce”, “streamlining the engineering organization” and “reducing the number of offices”. Mollenkopf also said a number of resources will be relocated to lower-cost regions.

Qualcomm lost out on a mammoth contract this year as Samsung opted not to adopt its flagship chip, Snapdragon, in its 2015 suite of devices – the S6, S6 Edge etc. Combined with the growing influence of Chinese chip vendors in the smartphone market and with Apple taking its chip manufacturing in-house based on rival ARM’s architecture, Qualcomm is missing out more and more on the LTE smartphone market, having totally dominated the 3G space with its technology being considered essential to the development of the 3G standard by the 3GPP.

It would appear that Qualcomm is looking to the next mobile era as a possible return to form, with Mollenkopf saying the firm will still be plugging in $4bn for R&D every year, roughly 15% of its annual revenues based on the results from the last fiscal year. Qualcomm may well be cutting its losses from what could be seen as a missed opportunity in LTE, and that it’s looking ahead to re-establishing itself in the 5G, minimising its revenue declines in the interim.

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