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Qualcomm to cut spending by billions, staff by thousands

23 Jul 2015

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.

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