Qualcomm slashes jobs and costs, says may split itself
Chipmaker Qualcomm Inc (QCOM.O) said it may break itself up as it delivered its third profit warning this year and announced plans to slash jobs and spending in the face of rising competition.
The company said it would reduce costs by about $1.4 billion, cut about 4,500 full-time staff, or 15 percent of its workforce, and boost capital returns to shareholders.
Qualcomm's shares fell 1.8 percent to $63.05 in after-market trading on Wednesday. The stock has lost a fifth of its value in a year.
Hedge fund Jana Partners is pushing for Qualcomm to spin off its chip business from its highly profitable patent-licensing income.
The chipmaker agreed with Jana to add two fund nominees to Qualcomm's board.
"Today, given that we are on the other side of the NDRC investigation... I think it's time to take a fresh look (at breaking up the company)," Chief Executive Steve Mollenkopf said on a conference call with analysts.
Qualcomm agreed in February to pay a fine of $975 million to the Chinese government's National Development and Reform Commission for anti-competitive practices.
The company faces intense competition from Taiwan's MediaTek Inc (2454.TW) and a handful of small Chinese companies that specialize in making chips for low-priced phones.
Qualcomm makes software and chips used in smartphones, tablets and gaming devices and is known for its Snapdragon processor used in high-end smartphones made by Samsung Electronics Co Ltd (005930.KS), HTC Corp (2498.TW) and ZTE Corp (000063.SZ).
This year, Samsung said it would use its own processor for the new Galaxy S6 smartphone instead of Snapdragon.
"The waning competitive position occupied by Qualcomm in supplying mobile chipsets - that's the fundamental issue and there is nothing they can do other than hope that Samsung goes away, which I believe is not going to happen," Drexel Hamilton analyst Richard Whittington said.
Qualcomm, which has about 30,000 employees, said it would significantly reduce its temporary workforce and the locations in which it operates.
The company said it expected to complete its strategic review by the end of the year.
Qualcomm is being advised by investment banks Goldman Sachs Group Inc (GS.N) and Evercore Partners Inc, according to people familiar with the matter.
The company cut both its full-year revenue forecast and the outlook for its semiconductor business.
Revenue fell 14.3 percent to $5.83 billion in the third quarter - the first quarterly fall in five years - and missed the average analyst estimate of $5.85 billion, according to Thomson Reuters I/B/E/S.
The company said it planned to return a minimum of 75 percent of free cash flow to stockholders through dividends and share repurchases.