By Don Clark And Chelsey Dulaney
Qualcomm Corp. said Wednesday that it would consider changes to
its corporate structure and cut $1.4 billion in spending, moving to
appease investors amid problems that triggered a 47% drop in its
fiscal third-quarter profit.
The company said the review, which it expects to complete by the
end of the year, would include possibilities such as separating its
businesses.
The San Diego-based company, which promised in April to review
its cost structure, said it also would cut 15% of its full-time
head count and "significantly" reduce its temporary workforce. It
also plans to cut $300 million in annual share-based compensation
grants.
Qualcomm estimated that it would book $350 million to $450
million in restructuring charges related to the moves. The Wall
Street Journal reported earlier this week that Qualcomm was
considering such a review.
Qualcomm has studied a breakup before and rejected the idea, but
the possibility re-emerged after activist investor Jana Partners
LLC in April bought a major stake in the company.
Qualcomm said it also has reached an agreement with Jana to add
Mark McLaughlin, chief executive of Palo Alto Network, and Tony
Vinciquerra, a senior adviser to TPG, to its board. Qualcomm said
it would add a third director approved by Jana to its board.
Shares of Qualcomm, down 21% over the past year, fell 2.3% to
$62.72 in after-hours trading.
Qualcomm disclosed the moves Wednesday along with results for
the quarter ended June 28, which brought more signs of how its
business has suffered amid shifting fortunes of major smartphones
makers and growing competition. Revenue declined 14% over the prior
year.
The company also issued a forecast for the current quarter that
pointed to further weak conditions and again lowered its forecast
for the year.
Qualcomm is the biggest supplier of chips for mobile phones. Its
products handle cellular communications and computing in
smartphones, sometimes on separate chips or combined on a single
piece of silicon.
The company has experienced a turbulent year, paying $975
million to settle an antitrust suit in China, while authorities in
the U.S., Europe and South Korea launched new investigations.
Meanwhile, rivals such as MediaTek Inc. have begun to sell new
modem chips that have cut into Qualcomm's dominant share in
technology for handling fourth-generation LTE networks.
Another factor lately concerns longtime customer Samsung
Electronics Co. The South Korean company has been losing market
share in smartphones to Apple Inc., which tends to use Qualcomm
modem chips but not the more expensive processors that Samsung has
frequently used.
This spring, Samsung raised another issue by opting to use its
own chips in the flagship Galaxy S6 announced this spring.
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. Revenue declined to $5.83
billion from $6.81 billion a year earlier.
On an adjusted basis that excludes share-based compensation and
results from an investment unit, Qualcomm said per-share profit was
99 cents a share. Analysts polled by Thomson Reuters had projected
earnings of 95 cents a share on revenue of $5.85 billion.
For the current quarter, Qualcomm projected that adjusted
earnings will fall by up to 40% to 75 cents to 95 cents share,
while forecasting revenue of $4.7 billion to $5.7 billion, which
would be a decline of up to 30% over the prior-year period.
The company also cut its forecast for the year ending in
September. Qualcomm now expects per-share earnings of $4.50 a share
to $4.70 a share, down from its lowered forecast of $4.60 to $5 a
share in April. It is now calling for revenue of $24.5 billion to
$25.5 billion, down from its April forecast of $25 billion to $27
billion in revenue.
Write to Don Clark at don.clark@wsj.com and Chelsey Dulaney at
Chelsey.Dulaney@wsj.com
Access Investor Kit for QUALCOMM, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7475251036
Subscribe to WSJ: http://online.wsj.com?mod=djnwires