Menu
Better together: Qualcomm says no to split despite declining profit

Better together: Qualcomm says no to split despite declining profit

Qualcomm's board has decided that the company's existing corporate structure is the best way forward

Breaking Qualcomm up is not the best way to turn its performance around, the company's board has decided.

Qualcomm designs and makes chips, primarily for the booming smartphone and connected devices markets. But in July the company reported lackluster results for the three months to June 28, with a 14 percent year-on-year decline in revenue and 47 percent drop in net profit.

CEO Steve Mollenkopf said then that he planned on "right-sizing" the company's cost structure -- a phrase that turned out to mean laying off more than one employee in seven. He also engaged external advisors to review the company's corporate structure and look at whether splitting the company up would increase its value.

But on Tuesday Qualcomm announced that it planned to keep its chip design and manufacturing operations together, concluding that its current structure puts it in the best position to make profitable products in the long term.

Mollenkopf faces a tough time turning that existing corporate structure around, as revenue and profit have continued to fall since he began the review. The year-on-year revenue decline accelerated to 18 percent for the three months to Sept. 27, although the drop in net profit slowed slightly, to 44 percent, Qualcomm reported on Nov. 4.

Looking ahead to the next quarter, Qualcomm warns that the revenue decline could accelerate further, with a year-on-year drop of between 15 percent and 27 percent, although it expects the fall in profit to slow to 23 percent or less, thanks in part to its cost-cutting program.

Qualcomm's rejection of a corporate split comes after Hewlett-Packard agreed to break up Dave and Bill's legacy, splitting a few weeks ago into Hewlett Packard Enterprise and HP Inc. The day that breakup happened, shareholders did see an increase in value, with the 1.6 percent drop in HPE's share price more than offset by the 13 percent jump in that of HP, defying the conventional wisdom that PCs and printers are on the way out.

Qualcomm, though, defended its existing structure on Tuesday, saying that it benefits twice from its in-house research and development operations, which create new technologies it can license as well as allowing it to improve the products it sells.

The components for smartphones and for the Internet of Things that Qualcomm designs are licensed to other companies for incorporation in their own chipsets. That business model is common in the chip industry -- Qualcomm licenses the processor cores it uses in its designs from ARM, which does not make chips itself.

Qualcomm, though, does makes its own chips, competing with some of its customers. That approach allows it to push its own technologies in the smartphone industry, encouraging other chipmakers to adopt and license them, it said.


Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Tags chipsPCComponents

Featured

Slideshows

Kiwi channel comes together for another round of After Hours

Kiwi channel comes together for another round of After Hours

The channel came together for another round of After Hours, with a bumper crowd of distributors, vendors and partners descending on The Jefferson in Auckland. Photos by Maria Stefina.​

Kiwi channel comes together for another round of After Hours
Consegna comes to town with AWS cloud offerings launch in Auckland

Consegna comes to town with AWS cloud offerings launch in Auckland

Emerging start-up Consegna has officially launched its cloud offerings in the New Zealand market, through a kick-off event held at Seafarers Building in Auckland.​ Founded in June 2016, the Auckland-based business is backed by AWS and supported by a global team of cloud specialists, leveraging global managed services partnerships with Rackspace locally.

Consegna comes to town with AWS cloud offerings launch in Auckland
Veritas honours top performing trans-Tasman partners

Veritas honours top performing trans-Tasman partners

Veritas honoured its top performing partners across the channel in Australia and New Zealand, recognising innovation and excellence on both sides of the Tasman. Revealed under the Vivid lights in Sydney, Intalock claimed the coveted Partner of the Year 2017 (Pacific) award, with Data#3 acknowledged for 12 months of strong growth across the market. Meanwhile, Datacom took home the New Zealand honours, with Global Storage and Insentra winning service provider and consulting awards respectively. Dicker Data was recognised as the standout distributor of the year, while Hitachi Data Systems claimed the alliance partner award. Photos by Bob Seary.

Veritas honours top performing trans-Tasman partners
Show Comments