Qualcomm Finally Succumbs to Jana Partners' Pressure to Split
Qualcomm plans to lay off 15% of its employees
In the last part of this series, we discussed the double-digit fall in Qualcomm’s (QCOM) revenue and profits. Qualcomm was forced to review its business objectives and adopt a “strategic realignment plan.” As a way to achieve a reduction in its expenditure, Qualcomm announced that it will lay off 15% of its workforce.
In 2014, Qualcomm employed ~31,300 employees that involve full-time as well as temporary staff. A 15% reduction in its workforce indicates that more than 4,500 workers will be affected by this decision. Qualcomm expects that this step will result in $350–$450 million in restructuring charges. Qualcomm also plans to cut $300 million from its annual share compensation grants to employees.
Technology sector announced the largest layoffs in 2014
The technology industry has always taken the layoff route to reduce its costs. For technology companies, employee costs form a significant part of the operating expenditure. This explains why layoffs top the list of cost control when technology companies want to immediately reduce their costs.
As the above chart shows, the 100,757 layoff announcements in 2014 were significant compared to 56,198 in 2013. Looking broadly at the tech space, layoffs rose by almost 80% last year. In 2014, the technology sector accounted for one out of five layoff announcements.
You can consider investing in the Technology Select Sector SPDR ETF (XLK) to gain exposure to Qualcomm. The stock accounts for 2.58% of XLK.
Browse this series on Market Realist:
- Part 1 - Why Is Qualcomm Considering a Split?
- Part 3 - How Have Apple and Samsung Contributed to Qualcomm’s Split?
- Part 4 - Qualcomm’s Business Lines Prompted the Split