YIBADA

Apple, Samsung Chips, Decreased Sales In China Break Qualcomm With Job Cuts, Cost Reduction

| Jul 28, 2015 12:33 PM EDT

Qualcomm

Qualcomm announced 15 percent job cuts and a plan to execute strategic transformation to reduce its operating costs on July 22. The aim is to recover its working margin by cost reductions by $1.4 billion. 

According to CNN Money, Qualcomm reported a fall in its Q3 earnings by 14 percent on July 22 with a 47 percent dip in profits compared to 2014. According to after-hours stock quotes, Qualcomm shares recorded a plunge of 1.2 percent, which is a 21 percent decline by 2014.

The company saw a cleft in their business model, since two of the largest smartphone makers in the world, Apple and Samsung started making their own chips. CLSA analyst, Srini Pajuri said that with the two tech giants owning 50 percent of the market share and designing their own chipsets, Qualcomm's product market witnessed a fall.

The wreckage primarily started with their Korean client Samsung deciding to develop their own smartphone chips for its Galaxy S6 model, and a significantly decreased sale of certain mobile phone sets in China which used their premium quality chips.

While Qualcomm plans to cut down on the operating costs, its strategy is to align the executive compensation with the shareholder returns. According to a statement by the company president Derek Aberle in an interview, "We decided we were going to take a fresh look at the corporate structure of the company."

Jana Partners (a hedge fund) will be adding three of its members in the Qualcomm board, CNBC reported. The investment firm entered into a partnership with Qualcomm earlier this year by owning major portion of its shares.

There is no official confirmation yet by Qualcomm about when will the eliminations happen or which jobs would be cut.  

Related News

Most Popular

EDITOR'S PICK