QUALCOMM (QCOM) Initiates Layoffs To Slash Annual Costs

Per Reuters, chipmaker QUALCOMM Incorporated (NASDAQ:QCOM) has started downsizing to improve its profitability. As part of its long-due promise to investors, management has initiated the layoff to trim annual costs by $1 billion or £704.6 million.

The company reported that it has begun to reduce its full-time and temporary workforce, keeping the exact number of job cuts undisclosed. It has offered severance packages to the affected employees.

After evaluation of non-headcount expense reductions, management concluded that a workforce reduction is needed to support the company’s long-term growth.

Furthermore, the size of the job cuts is large enough for Qualcomm to file a Worker Adjustment and Retraining Notification with the state of California.

As of Sep 24, Qualcomm employed about 33,800 full-time, part-time and temporary employees.

In January, the company said that it would implement a series of targeted cost reduction measure across its businesses in order to save $1 billion in annual costs, which was in alignment with its attempt to win over investors’ support against a hostile bid from rival, Broadcom Inc. (NASDAQ:AVGO) . The bid, however, was cancelled by the Trump administration on national security grounds.

Over the past three months, the stock has underperformed the industry with an average loss of 19.5% compared with 6.8% decline for the latter. Moreover, the company is likely to be hard hit as the U.S. government has banned sale of components by American firms to Chinese telecom equipment maker, ZTE Corp.



Citing a breach of agreement inked last year, the U.S. Department of Commerce slapped a seven-year ban on sale of various components to ZTE after it was caught illegally shipping goods to Iran. The strategic move is likely to hit Qualcomm the most, as it accounts for the lion’s share of semiconductor chips used in ZTE smartphones.

The chipmaker has been ramping up its operations since then to improve its earnings growth. At the same time, it is trying to retain its leadership in 5G and mobile connectivity with technological advancement. Qualcomm achieved a 5G data connection with the Snapdragon X50 5G modem chipset on 28GHz mmWave spectrum. Notably, it is at the forefront of driving Gigabit LTE and 5G in the industry.

Qualcomm carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Comtech Telecommunications Corp. (NASDAQ:CMTL) and United States Cellular Corporation (NYSE:USM) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech Telecommunications has an expected long-term earnings growth rate of 5%. It has exceeded earnings estimates in each of the trailing four quarters, with an average of 111.4%.

United States Cellular has an expected long-term earnings growth rate of 1%. It has exceeded earnings estimates thrice in the trailing four quarters, with an average of 306.5%.

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