Mobile chip giant Qualcomm shares slide amid planned job cuts as smartphones face worst slump in years
- Qualcomm’s tepid sales forecast pushed shares down 8 per cent amid weak smartphone demand, especially in China, which accounts for 60 per cent of company sales
- Last quarter, Qualcomm recorded US$285 million in restructuring charges, mostly from severance payments, and expects more workforce reductions
Sales will be US$8.1 billion to US$8.9 billion in the fiscal fourth quarter, Qualcomm said Wednesday in a statement. The midpoint of that range is well below the US$8.79 billion average analyst estimate.
The outlook renews concerns about a smartphone industry in the grips of its worst downturn in years. Qualcomm and its chip-making peers saw a steep drop in orders from handset manufacturers, which suddenly had more inventory than they needed. The reduction in spending on components for phones and other electronics will drag on until the end of the year, Qualcomm executives said on a conference call.
The company is taking steps to reduce its expenses, Qualcomm said, even as it invests in new products that will capitalise on the spread of artificial intelligence to smartphones. Already, it’s been reducing headcount. Last quarter, Qualcomm recorded US$285 million in restructuring charges, mostly from severance payments, and expects to conduct more workforce reductions.
“We are taking a conservative view of the market and will be proactively taking additional cost actions to ensure Qualcomm is well-positioned to deliver maximum value for stockholders in an uncertain environment,” chief executive officer Cristiano Amon said on the call.
The shares fell as low as US$118.71 in extended trading following the earnings announcement. Before the report, Qualcomm’s stock had increased about 18 per cent this year. That underperformed a broader rally for the chip industry, with the Philadelphia Stock Exchange Semiconductor Index gaining about 47 per cent in 2023.
Minus certain items, profit will be US$1.80 to US$2 a share in the current period, Qualcomm said. That compares with a US$1.94 projection.
A key problem: Demand in China, the biggest market for phones, hasn’t returned to projected levels. That region provides the company with more than 60 per cent of its sales.
