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The world’s largest mobile chip maker, Qualcomm, has announced plans to cut costs and staff in its quarterly earnings report which shows a huge drop in profits compared with a year ago.
Although profit of $1.2bn for the three months ending 28 June 2015 is up by 12% on the previous quarter, the figure is down by 47% compared with the same period in 2014.
Revenue of $5.8bn was down by 15% on the previous quarter and down by 14% compared with 2014.
Qualcomm issued its third profit warning of the year in the face of growing competition from Asia and said it plans to cut costs and jobs.
The company aims to reduce spending by $1.4bn, partly by reducing its temporary workforce “significantly” and its full-time workforce by 15% – which is around 4,500 jobs – according to the BBC.
Qualcomm said it also plans to streamline its engineering group, reduce the number of its offices and increase the mix of resources in lower-cost regions.
Other measures include reviewing alternatives to the company’s corporate and financial structure, which analysts said means Qualcomm may separate its chip and patent-licensing businesses.
“We are making fundamental changes to position Qualcomm for improved execution, financial and operating performance,” said Qualcomm chief executive Steve Mollenkopf.
“We are right-sizing our cost structure and focusing our investments around the highest return opportunities while reaffirming our intent to return significant capital to stockholders and refreshing our board of directors,” he said.
According to Mollenkopf, the company’s strategic realignment plan is designed to drive meaningful change in the near term without jeopardising its ability to retain and build upon its technology leadership position and create long-term value for stockholders.
Qualcomm’s Snapdragon processor is used by many Android devices, but is facing competition from chip makers in Taiwan and China.
Smartphone maker Samsung is also switching from Snapdragon processors to its own processers for new handsets.
Qualcomm’s shares have fallen by more than 20% over the past year, dropping a further 1.46% on the quarterly results with a weak outlook for the current quarter. The company expects revenues for the current quarter of $4.7bn to $5.7bn, which is down by 15% to 30% compared with the same period a year ago.
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