Qualcomm may break up, prepares to lay off thousands of employees — reports – Mobile World Live

Qualcomm may break up, prepares to lay off thousands of employees — reports

21 JUL 2015

Qualcomm is set to conduct a strategic review which could see the chipmaker broken up, and is separately considering wide-ranging redundancies, as it releases its quarterly results tomorrow (22 July).

According to a Wall Street Journal (WSJ) report, the review comes as activist investor Jana Partners is pushing for change in the company and may also include the return of more cash to shareholders, although its sources cautioned that nothing is guaranteed as plans are still “in flux”.

Meanwhile, facing competition from Taiwan’s MediaTek and small Chinese firms that specialise in making chips for low-end phones, The Information reported that layoffs could impact around 10 percent of its 30,000-strong workforce, although target units were not identified.

It added that the company may move more research and development activities to lower cost countries like India.

WSJ’s sources also said Qualcomm has been mulling a break up for years.

Jana Partners, a New York hedge fund worth $11 billion, revealed a stake of over $2 billion in Qualcomm in April and wants the company to consider a break up, which would likely see its chip-production unit separateD from its patent-licensing business, and bring on independent directors to its board while cutting costs.

Analysts at Arete Research Services believe the chip-making business could have a market valuation of around $74 billion, and the patent division could be worth $87 billion.

There has been a trend of consolidation among chip companies recently, with Avago Technologies buying Broadcom and Intel agreeing to buy Altera, and a break-up could allow Qualcomm to join in. Arete suggested a separate chip-making unit may be of interest to Intel.

Qualcomm has not commented on the matter although its spokesperson referred to an April statement when it reported a 46 percent drop in Q2 profit and CEO Steve Mollenkopf said the company, unhappy with its financial outlook, would undertake a comprehensive review of its cost structure.

Last week, the European Commission opened two formal antitrust investigations into possible “abusive behaviour” by Qualcomm.

The first case concerns EU rules which prohibit the abuse of a dominant position by offering financial incentives to customers on condition that they buy baseband chipsets exclusively or almost exclusively from Qualcomm.

The second is looking into whether Qualcomm engaged in “predatory pricing” by charging price below costs with a view to forcing its competition out of the market.


Saleha Riaz

Saleha joined Mobile World Live in October 2014 as a reporter and works across all e-newsletters - creating content, writing blogs and reports as well as conducting feature interviews...More

Read more