Qualcomm, the world’s largest supplier of application processors for smartphones and other portable electronics, on Wednesday announced a strategic realignment plan, under which the company plans to cut-down its costs, reduce headcount and consider spinning off its technology licensing business.
Qualcomm plans to implement a cost reduction action to reduce annual costs from its fiscal 2015 levels of $7.3 billion by about $1.4 billion through a number of targeted reductions that will not put at risk the company’s growth objectives or core technology roadmap. The initiatives include reductions of headcount, temporary workforce, streamlining of engineering organization, cutting down the number of offices and reducing compensations to the management.
In addition, the company said it would consider spinning off its technology licensing division – Qualcomm Technology Licensing (QTL). Many believe that such a move will help to increase shareholders value because QTL consistently earns huge profits. By contrast, Qualcomm Technologies, which sells application processors to handset makers, is facing tough competition from companies like MediaTek.
“We are making fundamental changes to position Qualcomm for improved execution, financial and operating performance,” said Steve Mollenkopf, CEO of Qualcomm. “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.”
The specific cost-reduction initiatives are expected to be fully implemented by the end of fiscal year 2016.
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KitGuru Says: As it appears, investors who wanted to separate QTL from the parent company may well get what they want. Essentially, this will create a huge patent owner, which will not develop actual products, but will earn money by licensing technologies to those, who do…