Qualcomm Cuts Fat From Top-tier Management to Cut Expenses in the Face of New Competition

Wireless Chip

Chip giant, Qualcomm, is shoring up its upper management in view of their Q3 2013 earnings call and projected 2014 demand and projected sales. Sources told Gigaom, that Qualcomm has been trying to rein in their expenses and the cuts have been going on for several days. With 31,000 employees, Qualcomm claims that they periodically make adjustments to try and streamline its operations, and that this is nothing unusual – a lot of businesses could be run with half the staff they currently have, it’s just a matter of getting the productivity out of the remaining employees.

Shipments

Qualcomm was the only major player to report fiscal Q4 sales on Wednesday, and even though they reported a net income of $1.5 billion, which translates to $.86 per share and non-GAAP earnings of $1.05 per share, up 33-percent from last year during the same time period – Wall Street wanted at least $1.08 per share. CEO Paul E. Jacobs said:

I am very pleased with our record financial performance this year as we delivered revenues of $25 billion, up 30% versus last year. Our technologies underpin the global growth of wireless data, and our semiconductor solutions are used across the industry’s flagship smartphones. Looking forward, we expect continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China with the anticipated launch of LTE. Qualcomm remains well positioned from a growth standpoint, and we expect double-digit compound annual growth rates for both revenues and earnings per share over the next five years.

2014 Guidance

Qualcomm is feeling a little competition from low-cost alternatives, such as MediaTek, as manufacturers seek to offer mobile devices at competitive prices – the processor and memory chips are often the places they seek to cut-costs. In addition, some companies, such as tech giant Samsung are making their own processing chips. These certainly helped slow down Qualcomm’s growth. However, CEO Jacobs, discussing with Wall Street analysts stated:

Looking at the fiscal 2014, we are expecting solid growth but at a lower rate than what we delivered in the last few years. This is partially due to the exceptionally strong year we just completed which included share gains and content share gains in QCT. In fiscal 2014 we are facing some mix and demand factors which we currently expect will moderate our QCT growth. In light of this we are taking near term actions Company-wide to prioritize investments, stay focused on growth but also control expenses in order to deliver operating profit growth in excess of revenue growth.

In trimming their staff, Qualcomm has cut several upper management jobs, such as Vice President level executives, with others demoted and one division saw the loss of nearly 100 jobs – with likelihood of further layoffs.  However, Qualcomm will continue to be a major player in the mobile communications field with its Snapdragon processors, found in most flagship smartphones – even rival, Samsung, is using Qualcomm chips because of their friendliness with LTE networks.

Let us know in the comments or on Google+ if you think Qualcomm has anything to worry about from MediaTek, Apple, or Samsung or is Qualcomm the best chip out there.

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