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 newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags PCchipsComponents

Featured

Slideshows

Meet the leading female front runners of the Kiwi channel

Meet the leading female front runners of the Kiwi channel

Reseller News honoured the leading female front runners of the New Zealand channel at the 2018 Women in ICT Awards (WIICTA) in Auckland. The awards honoured standout individuals across seven categories, spanning Entrepreneur; Innovation; Rising Star; Shining Star; Community; Technical and Achievement.

Meet the leading female front runners of the Kiwi channel
Meet the top performing customer-centric Microsoft channel partners

Meet the top performing customer-centric Microsoft channel partners

Microsoft honoured leading partners across the channel following a year of customer innovation and market growth in New Zealand. The 2018 Microsoft Partner Awards recognised excellence within the context of the end-user, spanning a host of emerging and established providers.

Meet the top performing customer-centric Microsoft channel partners
Reseller News launches new-look Awards at 2018 Judges’ Lunch

Reseller News launches new-look Awards at 2018 Judges’ Lunch

Introducing the Reseller News Innovation Awards, launched to the channel at the 2018 Judges’ Lunch in Auckland. With more than 70 judges now part of the voting panel, the new-look awards will reflect the changing dynamics of the channel, recognising excellence across customer value and innovation - spanning start-ups, partners, distributors and vendors.

Reseller News launches new-look Awards at 2018 Judges’ Lunch
Show Comments