Chipmaker Qualcomm Inc (QCOM.O) said it may break itself up as it delivered its third profit warning this year and announced plans to slash jobs and spending in the face of rising competition.
The company said it would reduce costs by about $1.4 billion, cut about 4,500 full-time staff, or 15 percent of its workforce, and boost capital returns to shareholders.
Qualcomm shares fell 1.8 percent to $63.05 in after-market trading on Wednesday. The stock has lost a fifth of its value in a year.
The move comes after hedge fund Jana Partners called for Qualcomm to spin off its chip business from its highly profitable patent-licensing income, among other changes the activist asked for.
“We decided we were going to take a fresh look at the corporate structure of the company,” Qualcomm president Derek Aberle said in an interview, adding that the chipmaker has reviewed its options twice already in the past decade.
“The environment is constantly changing so the analysis done earlier may not be valid anymore, so it’s in that context that we’re taking a look at it again now,” Aberle said.
The company said it expected to complete its strategic review by the end of the year and also agreed to add three new board members in cooperation with the activist.
For the review, Qualcomm is being advised by investment banks Goldman Sachs Group Inc (GS.N) and Evercore Partners Inc (EVR.N), according to people familiar with the matter.
Qualcomm’s Aberle added that M&A in the semiconductor industry is at a “heightened level.”
Semiconductor dealmaking has reached $79.7 billion so far this year, the highest level since 2000.
Qualcomm makes software and chips used in smartphones, tablets and gaming devices and is known for its Snapdragon processor used in high-end smartphones made by Samsung Electronics Co Ltd (005930.KS), HTC Corp (2498.TW) and ZTE Corp (000063.SZ).
It faces intense competition from Taiwan’s MediaTek Inc (2454.TW) and a handful of small Chinese companies that specialize in making chips for low-priced phones.
This year, Samsung said it would use its own processor for the new Galaxy S6 smartphone instead of Snapdragon.
Qualcomm agreed in February to pay a fine of $975 million to the Chinese government’s National Development and Reform Commission for anti-competitive practices..
The company cut both its full-year revenue forecast and the outlook for its semiconductor business.
Revenue fell 14.3 percent to $5.83 billion in the third quarter — the first quarterly fall in five years — and missed the average analyst estimate of $5.85 billion, according to Thomson Reuters I/B/E/S.