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No fun to be Qualcomm right now

Third-quarter earnings expected to be grim

Possible subhead: Company must announce something tomorrow (Wednesday)

Stock of Qualcomm rose 2.12 percent to $65.14 today (July 21) as national media and securities analysts discussed what the company will announce in its conference call with analysts tomorrow afternoon. It will reveal third-quarter earnings after the market closes tomorrow, and the expectations are grim.

The stock dropped 0.68 percent to $64.70 in after-hours trading, but it is still up on a day when the overall market was soft.

As alluded to in a Reader item yesterday (July 20), the company has a gun to its head. Hedge fund Jana Partners wants it to split its chipset and licensing businesses. Some are predicting a proxy war as Jana tries to get seats on the board.

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Qualcomm lost some Samsung business, agreed to pay a billion-dollar fine to China, and is now under European antitrust investigation. Second-quarter earnings plunged 46 percent and the consensus of analysts is for third quarter earnings to be down 41 percent, according to Thomson Reuters.

Investor's Business Daily said today that the company may well announce jobs cuts "and even a possible breakup, among other options" at its conference call tomorrow. Reuters said the company will announce a layoff of more than 10 percent of its workforce. The rumor picked up by the Reader yesterday was for a cut of 4000 jobs, or almost 13 percent.

Barron's today noted the layoff and possible splitup rumors, adding that Apple and other customers are asking Qualcomm to cut its prices.

The Wall Street Journal said this morning that Qualcomm is expected "to conduct a sweeping strategic review" that will examine the various strategies for getting the ship back on course.

If there are 4000 layoffs, and a large percentage of them are in San Diego, Qualcomm's ills will make a dent in the San Diego economy. The company is the largest for-profit, private-sector employer in the county and eighth largest employer overall.

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Possible subhead: Company must announce something tomorrow (Wednesday)

Stock of Qualcomm rose 2.12 percent to $65.14 today (July 21) as national media and securities analysts discussed what the company will announce in its conference call with analysts tomorrow afternoon. It will reveal third-quarter earnings after the market closes tomorrow, and the expectations are grim.

The stock dropped 0.68 percent to $64.70 in after-hours trading, but it is still up on a day when the overall market was soft.

As alluded to in a Reader item yesterday (July 20), the company has a gun to its head. Hedge fund Jana Partners wants it to split its chipset and licensing businesses. Some are predicting a proxy war as Jana tries to get seats on the board.

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Qualcomm lost some Samsung business, agreed to pay a billion-dollar fine to China, and is now under European antitrust investigation. Second-quarter earnings plunged 46 percent and the consensus of analysts is for third quarter earnings to be down 41 percent, according to Thomson Reuters.

Investor's Business Daily said today that the company may well announce jobs cuts "and even a possible breakup, among other options" at its conference call tomorrow. Reuters said the company will announce a layoff of more than 10 percent of its workforce. The rumor picked up by the Reader yesterday was for a cut of 4000 jobs, or almost 13 percent.

Barron's today noted the layoff and possible splitup rumors, adding that Apple and other customers are asking Qualcomm to cut its prices.

The Wall Street Journal said this morning that Qualcomm is expected "to conduct a sweeping strategic review" that will examine the various strategies for getting the ship back on course.

If there are 4000 layoffs, and a large percentage of them are in San Diego, Qualcomm's ills will make a dent in the San Diego economy. The company is the largest for-profit, private-sector employer in the county and eighth largest employer overall.

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Comments
15

San Diego was a hotbed of innovation in the early digital revolution. The San Diego Computer Society and the Apple Corps of San Diego encouraged programmers and hardware developers. Many local programmers, including myself, produced software used around the world. Adobe was born here under a different name. A La Jolla company called Howardsoft created the first Tax Preparer software. HP produced hardware here. Kaypro computers was founded in Solana Beach(?) (my memory is poor) Many early innovations evolved, changed names and owners, but began right here.

Now they're all gone to corporate headquarters elsewhere. I can't think of any hardware or software companies at the moment but Qualcomm. I think Intuit has offices in Rancho Bernardo.

Qualcomm will have to impress investors with something from R&D or they are in serious trouble. And dammit, hire Americans! You won't get good R&D from third world technical school grads.

July 21, 2015

swell: San Diego is one of the three U.S. biotech centers and has had some successful products, although it has also had its share of biotech companies that were similar to pump 'n dumps. The stock was run up on claims of a great successful product, the insiders who had paid almost nothing for their stock bailed, and naive investors were stuck with the stock when the touted product didn't come to pass.

Qualcomm has always been a very good company. It has run into some major problems, some of them self-inflicted. It does have a solid grasp on an excellent market, but has to right the ship. Best, Don Bauder

July 21, 2015

By the time technology reaches the public it is obsolete. Technology changes so fast that unless a company is invested in R&D just manufacturing the latest gizmo is not going to cut it. Qualcomm is a local company and has been a fairly good corporate citizen but as most employers they are looking to cut costs and that is easiest to do by cutting the workforce and of course importing cheap labor. After the layoff of American workers and the ripple effect of those layoffs then the community will see what the true cost of imported cheap labor is.

July 22, 2015

AlexClarke: Qualcomm is paying its two top executives outrageously high compensation. This could possibly make the layoff announcement very interesting, although it's quite possible the company's engineers have already digested the head cuttings that should be revealed this afternoon.

Letting the H-1B people go requires some steps that may be difficult, and the company might concentrate the axe on American-trained STEM (science, technology, engineering, mathematics) workers. Best, Don Bauder

July 22, 2015

do you know if Nathan Fletcher is still employed there?

July 22, 2015

Wabbitsd: Sorry, don't know about Fletcher. Best, Don Bauder

July 22, 2015

QUALCOMM SLASHES WORKFORCE BY 15 PERCENT, GREATER THAN EXPECTED. Qualcomm's this afternoon (july 22) said its employment slash will be 15 percent. The rumors this week, as reported by the Reader beginning Monday, were for a cut of around 12.7 percent, or 4000 heads.

The number would therefore be higher than 4000. At this point it is not known where the cuts would be made. If they are concentrated in San Diego, the local economy could take a hit, given the negative ripple effect.

Qualcomm also said it is looking at restructuring itself. This could be a split-up of its chipset and royalty businesses, as desired by Jana Partners, a hedge fund that is pressing the company to make changes.

Importantly, Qualcomm announced it will make changes to its board and also changes in executive compensation. It's not known if hedge fund Jana Partners will get seats on the board without the threatened proxy fight.

The company has announced it will make changes in executive compensation. This is important if it refers to the company's two top executives who had total compensation of almost $118 million last year, although much of that would not be paid in one year. This outsize level of compensation has been criticized. The stock dropped during regular hours trading but is rising after hours.

The company has a conference call with analysts beginning at 1:45 p.m. The Reader will cover that. Best, Don Bauder

July 22, 2015

Apparently JANA gets 3 seats on the board. Might as well call it JANACOMM now.

http://www.fool.com/investing/general/2015/07/22/qualcomm-earnings-get-overshadowed-by-strategic-re.aspx?source=eogyholnk0000001

"Yet the biggest news was the decision to start a comprehensive review of Qualcomm's cost structure, with its strategic realignment plan intending to cut $1.4 billion in spending by the end of fiscal 2016. The plan includes reaffirming capital-return expectations, adding new members to the board of directors, aligning executive compensation with performance, and "reviewing alternatives to the Company's corporate and financial structure," which investors took to mean that Qualcomm would think about breaking itself into multiple pieces. Activist investor JANA Partners got two seats on the board and will get a third in the near future."

July 22, 2015

"Greed is good" said Gordon Gekko.

July 22, 2015

Darren: Sad to say, since the 1980s, and accelerating today, and supported by business schools and so-called business scholars, Gordon Gekko's philosophy is deeply inculcated in the current business model. Best, Don Bauder

July 22, 2015

Very true my friend. People (employees) have become little numbers on spreadsheets.

July 22, 2015

Darren: True. Everything is numbers. The only important thing is next quarter's profit -- a number that is often achieved through phony accounting. Best, Don Bauder

July 23, 2015

Turns out that's a very appropriate comment. Jana's head, Barry Rosenstein, was mentored by Asher Edelman, an inspiration for the Gordon Gekko character.

July 22, 2015

KrimsonKing: I did not know that. Fascinating. Best, Don Bauder

July 23, 2015

QUALCOMM EARNINGS TOP ESTIMATES, BUT FORECASTS FALL FAR SHORT. Earnings per share for the third quarter were 99 cents (after adjustment for non-recurring costs and stop option expense). Analysts had expected 94 cents, according to Zacks Investment Research.

Pay no attention to this "beating analyst estimates" scam. Analysts come forth with low estimates, permitting the company's earnings -- no matter how bad they are -- to help pop the stock upward.

The company expects revenue of $4.7 billion to $5.7 billion for the fourth quarter. Analysts expected $6.1 billion. Best, Don Bauder

July 22, 2015

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