Qualcomm Reportedly Axing 10% Of Its Workforce, Plans To Spinoff Chip Unit

Despite being the world's largest maker of mobile semiconductors for smartphones and feature phones, the future of Qualcomm is now in question. All eyes will be on Qualcomm as when it reports its fiscal third-quarter results tomorrow, as that's when it may announce what options it's considering to turn things around, including a potential breakup.

According to The Wall Street Journal, activist investor Jana Partners LLC has been pushing for major changes at Qualcomm, hence why it's now considering a spinoff of its operations as well as other options. Jana holds a $2 billion stake in Qualcomm and wants the company to explore a number of possible movies, including cost cutting measures, repurchasing shares at a faster rate, and adding new members to its board.


As far as cost cutting goes, The Information reports that Qualcomm is preparing to hand out pink slips to thousands of employees, ultimately cutting its workforce by 10 percent. The layoffs would highlight how tough it is to serve the high-end smartphone business -- as prices continue to fall, Android-based smartphones sell for as little as $50 in places like India and China.

Qualcomm also provides semiconductors for much more expensive devices like Apple's iPhone family, though it also faces stiff competition from players like MediaTek and Spreadtrum Communications.

Around 66 percent of Qualcomm's $26 billion in annual revenue comes from its chip operations. However, around two-thirds of its $8 billion in annual profit comes from royalties it collects from smartphone patents. With that being the case, it wouldn't be unfathomable for Qualcomm to spin off its chip making business.