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Qualcomm layoff spurred by activist investor letter

Posted: 28 Jul 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Qualcomm? processor? Jana Partners? activist investor? smartphone?

Just recently, Qualcomm has dismissed about 4,700 people, many of them engineers who build the company's mobile SoCs. This event can be traced back to the letter Jana Partners LLC wrote that pushed Qualcomm executives to mobilise their restructuring plan.

Jana is the kind of firm that gets called an activist investor. Or call them a hard competitor in tug-of-war. They pull with the weight of $2 billion in investment in Qualcomm.

The layoff sounds heartless, and in many ways it is. But there also were some business insights in the letter posted online by TheStreet.com

The letter pointed out Qualcomm missed the mark with its latest Snapdragon smartphone processor. It "was cautious in embracing the transition to both 64bit architectures and leading edge 14nm process technology...resulting in subsequent market share loss, margin compression and depressed earnings."

It implied the moves resulted in Qualcomm losing a design win in Samsung's Galaxy S6 phone, but I doubt that. I think Samsung want to have its Exynos SoC be the first chip announced in its 14nm process and designed into the S6 as a matter of pride. And as for 64bit, everyone but Jana knows Apple jumped the gun on that one, way before any user-experience software needed it.

Qualcomm

Qualcomm broke into the top 10 U.S. patent recipients for the first time in 2014 with 2,103 patents, a 62 per cent increase over 2012.

In any case, Qualcomm is recovering, planning to make its next SoC in Samsung's process, the Jana letter said, and hopefully getting it used in whatever is its S7. We shall see.

If Jana gets its way, Qualcomm will split into a lucrative licensing business and a chip designer much more tightly managed for costs. Jana makes a decent point that Qualcomm's board has grown long in the tooth and it has let its spending increase in the go-go days of smartphones that now seem to be gone-gone.

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