Story image

Qualcomm to cut spending by billions, staff by thousands

23 Jul 15

Qualcomm has initiated a Strategic Realignment Plan following the release of its Q2, 2015 financial results, which showed a 47% decline in profit since the previous year.

As part of the realignment plan, Qualcomm plans to cut approximately $1.4 billion in spending to ‘aggressively right-size cost structure’.

This includes reducing the $300 million in annual share-based compensation grants.

On top of this, Qualcomm is set to cut full-time staff by 15% and temporary workers ‘significantly’.

As the company had 31,300 employees at the end of its last fiscal year, the layoffs will amount to about 4,700 workers.

Qualcomm is also considering separating its chip division from its patent licencing business.

As such, the company says it will cut back investments in product areas and focus on data centres, small cells and the Internet of Things.

Jana Partners, the investment company that owns a major stake of Qualcomm, has reportedly pressured the company to make the split.

Qualcomm 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.

On top of this, the company says a third director, to be approved by Jana, will be added to its board.

"The changes we are announcing today are designed to enable us to right-size our cost structure and reposition Qualcomm for improved financial and operating performance," says Steve Mollenkopf, Qualcomm CEO.

“We will continue to invest to build upon our technology leadership position and capitalise on the significant long-term opportunities before us in order to create sustainable long-term value for stockholders.”

Overall, Q2 2015 revenue for Qualcomm declined 14% to $5.8 billion from $6.8 billion in Q2 2014.

Operating income decreased by 40%, from $2.1 billion to $1.2 billion, and net income dropped 47%, from $2.2 billion to $1.2 billion.

Diluted earnings per share declined 44% and operating cash flow 21%.

The company’s forecast for the current quarter predicts further weak conditions and has once again been lowered for the year.

For the current quarter, Qualcomm projects adjusted earnings will fall by up to 40%, and forecasts revenue of $4.7 billion to $5.7 billion, which would be a decline of up to 30% over the prior-year period.

For the year ending in September, the company is now calling for revenue of $24.5 billion to $25.5 billion, down from its April forecast of $25 billion to $27 billion in revenue.

Opinion: Critical data centre operations is just like F1
Schneider's David Gentry believes critical data centre operations share many parallels to a formula 1 race car team.
MulteFire announces industrial IoT network specification
The specification aims to deliver robust wireless network capabilities for Industrial IoT and enterprises.
Google Cloud, Palo Alto Networks extend partnership
Google Cloud and Palo Alto Networks have extended their partnership to include more security features and customer support for all major public clouds.
DigiCert conquers Google's distrust of Symantec certs
“This could have been an extremely disruptive event to online commerce," comments DigiCert CEO John Merrill. 
Schneider Electric's bets for the 2019 data centre industry
From IT and telco merging to the renaissance of liquid cooling, here are the company's top predictions for the year ahead.
China to usurp Europe in becoming AI research world leader
A new study has found China is outpacing Europe and the US in terms of AI research output and growth.
Google says ‘circular economy’ needed for data centres
Google's Sustainability Officer believes major changes are critical in data centres to emulate the cyclical life of nature.
52mil users affected by Google+’s second data breach
Google+ APIs will be shut down within the next 90 days, and the consumer platform will be disabled in April 2019 instead of August 2019 as originally planned.