In April, Jana Partners, which holds a $2bn (£1.28bn) stake in Qualcomm, called for the company to spin off its chip unit from its patent licensing biz. The move could see the chip-maker cut thousands of jobs as it seeks to streamline its operations. The announcement, which came as the silicon giant reported disappointing earnings, was largely in line with the demands that the investor, hedge fund Jana Partners, had spelled out in mid-April. At last count, the company had 31,300 employees.
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Qualcomm said it also has reached an agreement with Jana to add Mark McLaughlin, chief executive of Palo Alto Network, and Tony Vinciquerra, a senior adviser to TPG, to its board.
In a plan laid out Wednesday, the company announced it would cuts its spending by cutting portions of its workforce, streamlining its engineering organization, increasing its mix of resources in lower-cost regions and reducing locations and invest in differentiated technology areas. Samsung this year chose to use its homegrown Exynos chip for the Galaxy S6 rather than Qualcomm’s Snapdragon processor, as it had in the past.
Qualcomm (NASDAQ:QCOM) late Wednesday announced it’s initiated a major corporate overhaul that includes big job cuts and the possible breakup of the wireless chipmaker, and it posted steep declines in earnings and sales for its fiscal Q3.
“We are making fundamental changes to position Qualcomm for improved execution, financial and operating performance”, Qualcomm CEO Steve Mollenkopf said in a statement. “While these specific cost initiatives are expected to be fully implemented by the end of fiscal year 2016, the company will continue to examine its cost structure for additional efficiencies that enhance profitability without sacrificing its future growth potential”, the firm 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”. A third director, selected by the company and approved by Jana, will be added soon. Its profit declined 47% and revenue fell 14% in the June 28 quarter, both compared with the year-earlier period.
For the current quarter, Qualcomm projected that its adjusted earnings will fall by up to 40% to between 75 cents and 95 cents share.
Meanwhile, rivals such as MediaTek Inc. have begun to sell new modem chips that have cut into Qualcomm’s dominant share in technology for handling fourth-generation LTE networks.
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