Qualcomm to cut jobs, costs

The San Diego-based company, which promised in April to review its cost structure, said it would consider reductions in head count, reducing the number offices and streamlining its engineering organization.

In April, the investment firm Jana Partners had called for a breakup of the highly profitable patent division from the unit which manufactures chips.

For the quarter ended in June, Qualcomm reported net income of $1.18 billion, or 73 cents a share, down from a profit of $2.24 billion, or $1.31 a share a year earlier.

Qualcomm said it expects to incur approximately $350 million to $450 million in restructuring and restructuring-related charges, of which approximately $100 million to $200 million is included in its fiscal fourth quarter, which runs until the end of September. The company said it also would reduce its share-based compensation grants by $300 million a year. He’s bowing to pressure from activist hedge fund Jana Partners LLC, which has been pushing for cost cuts, executive pay realignment and the return of more capital to investors.

To replace them, Qualcomm is adding Mark McLaughlin, CEO of Palo Alto Networks Inc., and Tony Vinciquerra, a former executive of Fox Networks Group Inc., as part of an agreement with Jana. Together with Jana, Qualcomm will also appoint another board member soon.

Licensing revenue saw a modest 5.7 per cent year-on-year increase to $1.99bn.

More financial declines are ahead, though, as Qualcomm cut its Q4 forecast. Changes to the company’s board include the retirement of Brent Scowcroft and Duane Nelles, while Donald Cruickshank won’t seek re-election in 2016, and Raymond Dittamore won’t stand for re-election in 2017, assuming he’s elected in 2016, Qualcomm said. Samsung recently opted to use its own chips in its flagship Galaxy S6 smartphone rather than Qualcomm’s chip. Analysts polled by Thomson Reuters had projected earnings of 95 cents a share on revenue of $5.85 billion.

Despite confirmation of cost cuts that had been rumored in recent weeks, Qualcomm stock was down 1.5% in after-hours trading, after the announcements.

Qualcomm also delivered quarterly earnings Wednesday that beat analysts’ expectations, although revenue came in at a slight miss. On average, analysts had estimated earnings of 95 cents on sales of $6.13 billion, according to data compiled by Bloomberg.

Mr. Mollenkopf, who became CEO past year, vowed to focus Qualcomm’s spending on developing products likely to bring the biggest payoff without sacrificing the company’s lead in wireless communications technology.