Struggling Qualcomm Eliminates 200 Jobs
San Diego-based Qualcomm Inc. laid off nearly 200 people Thursday in a cutback that the company said is unrelated to its lagging stock price or the slowing demand in South Korea for its wireless phone chips.
On Wednesday, the firm warned that sales of its phone chips could decline in its fiscal fourth quarter because the elimination of phone subsidies in South Korea is hurting demand. The country is Qualcomm’s largest market for its specialty chips.
“Nothing in particular brought this [layoff] on; it’s just part of our ongoing need to keep the organization streamlined and healthy,” said Dan Sullivan, Qualcomm’s senior vice president of human resources.
Still, the move is another blow to a company that was the toast of the stock market and filled with euphoric employees earlier this year.
In 1999, the firm’s stock rose a stunning 27-fold and transformed large segments of its work force into stock-option “quillionaires.” In recent months, however, Qualcomm stock has taken a steady beating; it is down more than 60% so far this year.
The shares fell $2.06 Thursday to $61.50 on Nasdaq.
The reversal of fortune started a few months ago when a key vendor in China ditched plans for the immediate use of Qualcomm chips and wireless technology. Then South Korea banned the country’s mobile-phone companies from discounting phones to win customers--an action that more than doubled the price of phones for consumers on June 1.
Next, Wall Street analysts cut earnings estimates for Qualcomm, citing the Korean subsidy ban. Also, Qualcomm is a part owner in the Globalstar satellite communications venture that is struggling amid expectations of a $160-million cash shortfall this year.
Sullivan said the job cuts represent less than 3% of the firm’s 7,250-person work force and include consultants as well as temporary and full-time workers. He said the affected workers are being given at least a week’s notice, a severance package and outplacement assistance. Stock options that have not vested will be canceled.
The largest share of the layoffs were in the firm’s Globalstar unit, which had completed a long-running contract to build ground stations for the satellite network.
A Qualcomm employee said the company has 400 to 500 Globalstar employees, and that the layoffs will reduce the unit’s payroll by 30%.
Sullivan said Qualcomm still is focused on designing and building satellite phones for the venture, and on finding more commercial uses for the network.
For more than two weeks, rumors of a much-larger layoff coursed wildly through company buildings, further agitating employees crestfallen over the sinking stock. But Sullivan dismissed the notion that morale is flagging. “It’s always dangerous to measure employee motivation and commitment to the company by the stock price,” he said. “Qualcomm has always been a volatile stock, and we’re a company that faced a lot of challenges in the late ‘80s and ‘90s.”
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Times staff writer Chris Kraul contributed to this report.
* COOLING SECTOR?
Some industry execs fear wireless growth may slow. C4
