By Lehar Maan and Anya George Tharakan
(Reuters) - Chipmaker Qualcomm Inc (O:QCOM) said it may break itself up as it delivered its third profit warning this year and announced plans to slash jobs and spending in the face of rising competition.
The company said it would reduce costs by about $1.4 billion, cut about 4,500 full-time staff, or 15 percent of its workforce, and boost capital returns to shareholders.
Qualcomm's shares fell about 1 percent to $63.50 in after-market trading on Wednesday. The stock has lost a fifth of its value in a year.
Hedge fund Jana Partners is pushing for Qualcomm to spin off its chip business from its highly profitable patent-licensing income.
The chipmaker agreed with Jana to add two fund nominees to Qualcomm's board.
The company faces intense competition from Taiwan's MediaTek Inc (TW:2454) and a handful of small Chinese companies that specialize in making chips for low-priced phones.
Qualcomm makes software and chips used in smartphones, tablets and gaming devices and is known for its Snapdragon processor used in high-end smartphones made by Samsung Electronics Co Ltd (KS:005930), HTC Corp (TW:2498) and ZTE Corp (SZ:000063).
This year, longtime customer Samsung said it would its own processor for the new Galaxy S6 smartphone instead of Snapdragon.
"The waning competitive position occupied by Qualcomm in supplying mobile chipsets — that's the fundamental issue and there is nothing they can do other than hope that Samsung goes away, which I believe is not going to happen," Drexel Hamilton analyst Richard Whittington said.
Qualcomm, which has about 30,000 employees, said it would significantly reduce its temporary workforce and the locations in which it operates.
The company said it expected to complete its strategic review by the end of the year.
Qualcomm is being advised by investment banks Goldman Sachs (NYSE:GS) and Evercore Partners Inc, according to people familiar with the matter.
The Wall Street Journal reported on Monday that Qualcomm was considering splitting itself up.
The Information news website reported on Monday that the chipmaker was preparing to lay off several thousand employees.
Qualcomm cut its full-year revenue forecast to $24.5 billion-$25.5 billion from $25 billion-$27 billion and cut its adjusted profit forecast to $4.50-$4.70 per share from $4.60-$5.00.
Revenue fell 14.3 percent to $5.83 billion in the third quarter — the first quarterly fall in five years — and missed the average analyst estimate of $5.85 billion, according to Thomson Reuters I/B/E/S.
The company said it planned to return a minimum of 75 percent of free cash flow to stockholders through dividends and share repurchases.