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Qualcomm to cut 15% of workforce as part of 'realignment plan'

In its third-quarter financial report, the chipmaker lays out restructuring plans and slashes projections due to lower expectations for the semiconductor business.

Qualcomm CEO Steve Mollenkopf
CEO Steve Mollenkopf said the chipmaker is being repositioned for "improved financial and operating performance." Justin Sullivan/Getty Images

Following restructuring murmurs earlier this week, Qualcomm confirmed those plans with further details while publishing third-quarter financial results after the bell on Wednesday.

The tech giant reported a net income of $1.2 billion, or 73 cents per share (statement). Non-GAAP earnings were 99 cents per share on a revenue of $5.8 billion. Wall Street was looking for earnings of 95 cents per share with $5.85 billion in revenue.

Qualcomm is still coming down from a $975 million fine imposed last quarter by the China National Development and Reform Commission (NDRC) over an anti-monopoly investigation.

Despite the slight revenue miss, shareholders appear to have been assuaged by the extensive newly-announced plans -- possibly helped by the unofficial warning already dropped a few days prior. Qualcomm shares were seen to have edged upward slightly in after-hours trading.

In the third-quarter report, Qualcomm CEO Steve Mollenkopf elaborated about what his company simultaneously unveiled as its "Strategic Realignment Plan," which includes a 15 percent reduction in the full-time employee workforce on top of numerous other cost-cutting measures.

"Importantly, the changes we are announcing today are designed to enable us to right-size our cost structure and reposition Qualcomm for improved financial and operating performance," Mollenkopf wrote.

Qualcomm is aiming to slash spending rates by at least $1.1 billion, which includes reducing annual share-based compensation grants by approximately $300 million.

Qualcomm is also bolstering its board of directors with the additions of Palo Alto Networks CEO Mark D. McLaughlin and former Fox Networks Group CEO Tony Vinciquerra.

However, Qualcomm acknowledged that the restructuring scheme will still incur anywhere between $350 million to $450 million in charges, which are going to put a dent in the fourth quarter report.

For the fourth quarter, Wall Street is looking for non-GAAP earnings of $1.08 per share with $6.13 billion in revenue.

Qualcomm cut its outlook to a fourth quarter revenue guidance range of $4.7 billion to $5.7 billion with earnings now projected to fall between 75 and 95 cents per share.

The chipmaker partially attributed the reduction to a lower outlook for its semiconductor business, which in turn was blamed on lower-than-expected demand -- notably disappointing sales in China for mobile devices using premium chipsets.

In light of this, Qualcomm is only expecting to ship between 1.52 billion and 1.6 billion 3G/4G device shipments worldwide during calendar year 2015.

Even before the threat of massive layoffs garnered attention on Monday, Qualcomm had been taking heat from shareholder Jana Partners.

The activist investor group has been actively pushing Qualcomm to buy back more shares, potentially split up, pay more in dividends and maximize shareholder value.

Jana endorsed the restructuring plan unveiled on Wednesday, with managing partner Barry Rosenstein commenting, "We support the bold steps the Board and management are pursuing to enhance stockholder value and are pleased to have worked constructively with them in this endeavor."

This story originally posted as "Qualcomm outlines restructuring plans amid mixed Q3 earnings report" on ZDNet.