Qualcomm to slash 4,500 jobs and ponders splitting business

Firm facing tough times as smartphone demand slows

Troubled chip firm Qualcomm has announced plans to cut 4,500 jobs from its global workforce and is considering splitting the business into smaller units.

The planned job cuts will come from the Qualcomm CDMA Technologies (QCT) division and represent 15 percent of the total workforce.

Qualcomm said in a strategic review that the cuts will save $1.4bn from its outgoings and help the company operate in a more profitable and efficient way.

Chief executive Steven Mollenkopf explained that the company has to rein in spending and be able to react to market demands.

"These initiatives are focused on areas within our control, including making sure we have the right cost structure for the future, and a corporate structure that maximises value and will best position us for the strategic opportunities ahead in a dynamic industry landscape," he said on a call to discuss the plans.

The company is also considering splitting the Qualcomm Technology Licensing and QCT divisions.

"Qualcomm's board and management, with the assistance of outside financial advisors, are conducting a review of the company's corporate structure (including possible business separation alternatives)," the firm said.

Qualcomm has suffered in recent months from decisions by smartphone manufacturers, notably Samsung, not to use its latest Snapdragon processor in the Galaxy S6 smartphone.

Furthermore, Mollenkopf said that competition in the market is squeezing chip manufacturers in the same way that former mobile phone companies were affected.

"The same dynamics, particularly with concentration in the industry, that occurred over the last decade and a half to people like Nokia or Motorola with a vertical strategy, I think still happen with chipsets today," he said.

Qualcomm has also been hit hard in China where it had to pay $975m to settle an anti-trust case after being accused of overcharging and exploiting its position in the wireless communications standards sector.

This has forced the company to lower the revenue it can charge for patents in the region.

Qualcomm said that this situation being settled is one reason for pursuing new ideas for the future, as the company can now operate with a legal and financial clarity that was not available while the case was ongoing.

Neil Mawston, at analyst firm Strategy Analytics, told V3 that Qualcomm had been caught in a "perform storm" of problems and is likely to face an uphill struggle for up to two years.

"First, Qualcomm was forced by the Chinese government to reduce the prices of its intellectual property for mobile phones. Second, Qualcomm had well-publicised performance issues with some of its mobile chipsets," he said.

"And third, MediaTek and Spreadtrum have significantly upped their game this year and are giving Qualcomm unexpected competition."