7 ms·

Qualcomm lays off 15% of its workforce, succumbs to cult of shareholder value

86 points by RachelF 11y ago

faragon 11y ago
So they're going to cut their CPU R&D and become a generic ARM IP integrator, plus their GPU and radio-frequency circuits (Adreno GPU, GSM, WiFi, GPS). Next moves could be discarding their own GPU for the ARM generic ones (Mali) and using 3rd party IP for the radio. Scary.
- higherpurpose 11y ago
  Which is funny because the reason Qualcomm screwed up recently (besides all the anti-competitive/antitrust issues) is because it didn't come out with its own next-generation custom CPU core sooner, and had to use stock ARM IP which I guess it didn't have much experience in handling. The shareholders' "solution" is what will destroy the company. Qualcomm would've been fine in the next 2 quarters, once it passed the Snapdragon 810 generation. I don't know why they freaked out so badly after just one bad quarter (and after Qualcomm has constantly grown for the past 5 years) to the point where they want to split the company. That seems rather crazy. I wonder if there's something else besides next-quarter-profit thinking behind this motivation.
  - fpgeek 11y ago
    If you believe the article (I'm not sure whether or not I do), the shareholders didn't freak out because of the bad quarter - it was just an opportunity to push their pre-existing agenda of prioritizing returning capital to shareholders instead of investing in the business. If that happens to destroy the company in the long run, these shareholders might not care - nothing stops them from selling their shares well before the long run arrives.
- TorKlingberg 11y ago
  I really cannot see Qualcomm using 3rd party IP for cellular radio. It's their core business, and they are the leader in LTE modems.
- jeswin 11y ago
  It may not be a bad idea after all. Unlike Intel, Qualcomm hasn't been able to demonstrate a price-performance advantage with in house engineering. MediaTek's far cheaper ARMv8 processors are competitive performance-wise.
  - fpgeek 11y ago
    Um, what? Yes, the ARMv8 transition was a problem, but until then, Qualcomm had been consistently delivering the best combination of power and performance all the way back to the Snapdragon S4. It's not like Samsung was putting Qualcomm chips in their flagships because they wanted to - they had to in order to keep them competitive.
    - honest_joe 11y ago
      Not really. They had to due to patents for LTE in USA.
      - deleted 11y ago
        [deleted]
        honest_joe 11y ago
        Sorry it must have not been clear but I was talking about Samsung and Exynos and the reason why they have used Snapdragon years ago in US/EU markets.
      - fpgeek 11y ago
        Yes, they had to pay Qualcomm for their LTE patents, but that didn't mean they had to use Qualcomm SoCs. Other devices (e.g. Galaxy Nexus, Droid Bionic, HTC One X+) married Qualcomm LTE radios with non-Qualcomm SoCs. Even Samsung did this for a few devices (e.g. Galaxy Note and Note 2 LTE, a few S2 and S3 variants), but, until this year, that was a small and shrinking portion of their lineup. Qualcomm's past engineering success was a big part of the reason why. Samsung/ARM's engineering failures (e.g. big.LITTLE and cache coherency issues with the original Exynos Octa) were the another part of the reason, but I don't think that changes the overall picture.
golergka 11y ago
But shareholders are people who actually own the place. And if you own something, you are in charge: even if you own something collectively, and hire a manager to make immediate decisions, you have the power to [collectively] tell that manager what do you want him to do. Abstract "business inetersts" only serve to earn money to business's owners in the end. Being a market leader is only a means to an end of making money for the owners. If the people who own the place decide, for whatever reason, that they don't need long-term development and want quick money now instead, let them be: it's their decision to make. Now, it is possible that shareholders don't act in their true interests, and they should be thinking about long-term value instead, because that way they'll earn more money in the end. But it's them who you need to convince of that, and the argument should be structured completely differently. Blaming CEO of the company forthe fact that he does exactly what his collective bosses tell him to do, instead of thinking of abstract "business interests" (that exist just to earn money to his bosses) and employees (to whom his company is responsible only in the extents of their employment agreements) is ridiculous.
- jahnu 11y ago
  There was an article recently on the BBC that shareholders there are only holding shares for an average of 6 months. Their motivations then become extremely short term. The Bank of England's chief economist has warned that this is slowing growth. http://www.bbc.com/news/business-33660426 http://www.bbc.com/news/business-33660426
  - ucaetano 11y ago
    Just as slow and entrenched management is also slowing growth. http://www.economist.com/news/leaders/21642169-why-activist-investors-are-good-public-company-capitalisms-unlikely-heroes http://www.economist.com/news/leaders/21642169-why-activist-... There are many ways to set up a company in a way that reduces the influence of activist investors and short-term holders. One is reducing liquidity (such as Berkshire). Another is setting up classes of shares (such as Google). Still, they only make sense when the company is profitable and paying nice dividends (or growing fast). When you IPO you're going to the market asking for money and offering growth or dividends in return. If you don't want to be subject to the conditions investors place on the capital, don't raise any and keep the company private. You can't have the cake (receive money from investors) and eat it too (not be subject to their demands).
steve19 11y ago
I hate the term "activist investor", "robber baron" or "corperate raider" is more apt in so many cases.
- jbb555 11y ago
  Or perhaps "owner" would do. It might not be what you would like but they own the place so it's their right to do what they like with it. Of course when they ruin it, it just opens up competition for more enlightened compaies so it's not all bad,
  - fpgeek 11y ago
    "Owner" is usually an overstatement. Yes, an activist investor has to own some chunk of the company (and it has to be a big enough chunk that management will pay attention to them), but they don't own the whole thing - or even a controlling interest. If they did, they wouldn't need to be activist, they'd just fire the existing board and management and hire people that would do what they want. Instead, activist investors own a small, but large enough chunk, advocate for what they want and rely on other investors being passive (e.g. because a lot of the company is owned by tiny slivers of much larger portfolios) even if what they're advocating isn't in other investors' interests.
    - golergka 11y ago
      If you're passive, it means that you don't have any opinions that you want to fight for and you are OK with other people making the decision.
bhouston 11y ago
This is actually about Qualcomm not being g a provider of CPUs to either apple and Samsung who basically is. The cellphone market if you are not in those phones you are fighting for scraps. This was a necessary move.
rayiner 11y ago
Teeth gnashing about short termism among investors aside, there may be a practical reason for this move. Apple and Samsung are both moving to their own micro-architectures. Apple has been using an in-house design since the A6, and Samsung's 64-bit ARM core will likely drop in the next year or two (the M1). Doing your own CPU architectures is a phenomenally capital intensive business, and Qualcomm may not feel positioned to keep up. Even ARM is getting left behind. The A57 is a power-hungry design that has faced major problems with thermal throttling in many designs. The amount of cash Apple and now Samaung can throw at their custom designs may be overwhelming.
- fpgeek 11y ago
  > The amount of cash Apple and now Samaung can throw at their custom designs may be overwhelming. Not to mention all of the soon-to-be-ex Qualcomm engineers it just got a lot easier for them to hire.
- smackfu 11y ago
  Don't they all still use Qualcomm comm chips?
  - blinkingled 11y ago
    Not exclusively anymore - Samsung is starting to use it's own in-house chips for modems (some versions of S6 use them right now). Mediatek is doing the same I think. Intel has its own that the ZenFone 2 is using for example. Not sure about Apple.
  - akgerber 11y ago
    Depends on what you mean by 'chips'— Qualcomm sells both discrete modems, which many cell manufacturers use, and systems-on-a-chip including modems, which they had recently been doing very well with, but just had a bad round of.
- higherpurpose 11y ago
  That's nonsense. First off, ARM is able to "keep up" with only tens of millions in profit a year. Second, Qualcomm is one of the richest chip makers. Third, Samsung hasn't been using custom CPUs and GPUS - at all.
bryanlarsen 11y ago
You may complain about quarterly capitalism, but studies show that investors with a short time horizon do better than investors with a longer one. http://marginalrevolution.com/marginalrevolution/2015/07/how-bad-a-problem-is-quarterly-capitalism.html http://marginalrevolution.com/marginalrevolution/2015/07/how...
protomyth 11y ago
Do you have a 401K or IRA? Do you pick your funds based on long term company fundamentals or how much the fund is returning year after year? Does your HR department hear from employees that the companies they picked to run their accounts are not performing each year?
JustSomeNobody 11y ago
A few short years from now Qualcomm won't actually produce anything. Instead it'll just license their patents. Yet another company that won't actually "make" stuff. Eventually it is all going to come crumbling down.
secondox 11y ago
come on Qualcomm is a US company, just doing what everybody else does the best: layoff when the diaper is wet.

86 points by RachelF 11y ago

So they're going to cut their CPU R&D and become a generic ARM IP integrator, plus their GPU and radio-frequency circuits (Adreno GPU, GSM, WiFi, GPS). Next moves could be discarding their own GPU for the ARM generic ones (Mali) and using 3rd party IP for the radio. Scary.

higherpurpose 11y ago
Which is funny because the reason Qualcomm screwed up recently (besides all the anti-competitive/antitrust issues) is because it didn't come out with its own next-generation custom CPU core sooner, and had to use stock ARM IP which I guess it didn't have much experience in handling. The shareholders' "solution" is what will destroy the company. Qualcomm would've been fine in the next 2 quarters, once it passed the Snapdragon 810 generation. I don't know why they freaked out so badly after just one bad quarter (and after Qualcomm has constantly grown for the past 5 years) to the point where they want to split the company. That seems rather crazy. I wonder if there's something else besides next-quarter-profit thinking behind this motivation.
- fpgeek 11y ago
  If you believe the article (I'm not sure whether or not I do), the shareholders didn't freak out because of the bad quarter - it was just an opportunity to push their pre-existing agenda of prioritizing returning capital to shareholders instead of investing in the business. If that happens to destroy the company in the long run, these shareholders might not care - nothing stops them from selling their shares well before the long run arrives.
TorKlingberg 11y ago
I really cannot see Qualcomm using 3rd party IP for cellular radio. It's their core business, and they are the leader in LTE modems.
jeswin 11y ago
It may not be a bad idea after all. Unlike Intel, Qualcomm hasn't been able to demonstrate a price-performance advantage with in house engineering. MediaTek's far cheaper ARMv8 processors are competitive performance-wise.
- fpgeek 11y ago
  Um, what? Yes, the ARMv8 transition was a problem, but until then, Qualcomm had been consistently delivering the best combination of power and performance all the way back to the Snapdragon S4. It's not like Samsung was putting Qualcomm chips in their flagships because they wanted to - they had to in order to keep them competitive.
  - honest_joe 11y ago
    Not really. They had to due to patents for LTE in USA.
    - deleted 11y ago
      [deleted]
      - honest_joe 11y ago
        Sorry it must have not been clear but I was talking about Samsung and Exynos and the reason why they have used Snapdragon years ago in US/EU markets.
    - fpgeek 11y ago
      Yes, they had to pay Qualcomm for their LTE patents, but that didn't mean they had to use Qualcomm SoCs. Other devices (e.g. Galaxy Nexus, Droid Bionic, HTC One X+) married Qualcomm LTE radios with non-Qualcomm SoCs. Even Samsung did this for a few devices (e.g. Galaxy Note and Note 2 LTE, a few S2 and S3 variants), but, until this year, that was a small and shrinking portion of their lineup. Qualcomm's past engineering success was a big part of the reason why. Samsung/ARM's engineering failures (e.g. big.LITTLE and cache coherency issues with the original Exynos Octa) were the another part of the reason, but I don't think that changes the overall picture.

golergka 11y ago

But shareholders are people who actually own the place. And if you own something, you are in charge: even if you own something collectively, and hire a manager to make immediate decisions, you have the power to [collectively] tell that manager what do you want him to do. Abstract "business inetersts" only serve to earn money to business's owners in the end. Being a market leader is only a means to an end of making money for the owners. If the people who own the place decide, for whatever reason, that they don't need long-term development and want quick money now instead, let them be: it's their decision to make. Now, it is possible that shareholders don't act in their true interests, and they should be thinking about long-term value instead, because that way they'll earn more money in the end. But it's them who you need to convince of that, and the argument should be structured completely differently. Blaming CEO of the company forthe fact that he does exactly what his collective bosses tell him to do, instead of thinking of abstract "business interests" (that exist just to earn money to his bosses) and employees (to whom his company is responsible only in the extents of their employment agreements) is ridiculous.

jahnu 11y ago
There was an article recently on the BBC that shareholders there are only holding shares for an average of 6 months. Their motivations then become extremely short term. The Bank of England's chief economist has warned that this is slowing growth. http://www.bbc.com/news/business-33660426 http://www.bbc.com/news/business-33660426
- ucaetano 11y ago
  Just as slow and entrenched management is also slowing growth. http://www.economist.com/news/leaders/21642169-why-activist-investors-are-good-public-company-capitalisms-unlikely-heroes http://www.economist.com/news/leaders/21642169-why-activist-... There are many ways to set up a company in a way that reduces the influence of activist investors and short-term holders. One is reducing liquidity (such as Berkshire). Another is setting up classes of shares (such as Google). Still, they only make sense when the company is profitable and paying nice dividends (or growing fast). When you IPO you're going to the market asking for money and offering growth or dividends in return. If you don't want to be subject to the conditions investors place on the capital, don't raise any and keep the company private. You can't have the cake (receive money from investors) and eat it too (not be subject to their demands).

steve19 11y ago

I hate the term "activist investor", "robber baron" or "corperate raider" is more apt in so many cases.

jbb555 11y ago
Or perhaps "owner" would do. It might not be what you would like but they own the place so it's their right to do what they like with it. Of course when they ruin it, it just opens up competition for more enlightened compaies so it's not all bad,
- fpgeek 11y ago
  "Owner" is usually an overstatement. Yes, an activist investor has to own some chunk of the company (and it has to be a big enough chunk that management will pay attention to them), but they don't own the whole thing - or even a controlling interest. If they did, they wouldn't need to be activist, they'd just fire the existing board and management and hire people that would do what they want. Instead, activist investors own a small, but large enough chunk, advocate for what they want and rely on other investors being passive (e.g. because a lot of the company is owned by tiny slivers of much larger portfolios) even if what they're advocating isn't in other investors' interests.
  - golergka 11y ago
    If you're passive, it means that you don't have any opinions that you want to fight for and you are OK with other people making the decision.

bhouston 11y ago

This is actually about Qualcomm not being g a provider of CPUs to either apple and Samsung who basically is. The cellphone market if you are not in those phones you are fighting for scraps. This was a necessary move.

rayiner 11y ago

Teeth gnashing about short termism among investors aside, there may be a practical reason for this move. Apple and Samsung are both moving to their own micro-architectures. Apple has been using an in-house design since the A6, and Samsung's 64-bit ARM core will likely drop in the next year or two (the M1). Doing your own CPU architectures is a phenomenally capital intensive business, and Qualcomm may not feel positioned to keep up. Even ARM is getting left behind. The A57 is a power-hungry design that has faced major problems with thermal throttling in many designs. The amount of cash Apple and now Samaung can throw at their custom designs may be overwhelming.

fpgeek 11y ago
> The amount of cash Apple and now Samaung can throw at their custom designs may be overwhelming. Not to mention all of the soon-to-be-ex Qualcomm engineers it just got a lot easier for them to hire.
smackfu 11y ago
Don't they all still use Qualcomm comm chips?
- blinkingled 11y ago
  Not exclusively anymore - Samsung is starting to use it's own in-house chips for modems (some versions of S6 use them right now). Mediatek is doing the same I think. Intel has its own that the ZenFone 2 is using for example. Not sure about Apple.
- akgerber 11y ago
  Depends on what you mean by 'chips'— Qualcomm sells both discrete modems, which many cell manufacturers use, and systems-on-a-chip including modems, which they had recently been doing very well with, but just had a bad round of.
higherpurpose 11y ago
That's nonsense. First off, ARM is able to "keep up" with only tens of millions in profit a year. Second, Qualcomm is one of the richest chip makers. Third, Samsung hasn't been using custom CPUs and GPUS - at all.

bryanlarsen 11y ago

You may complain about quarterly capitalism, but studies show that investors with a short time horizon do better than investors with a longer one. http://marginalrevolution.com/marginalrevolution/2015/07/how-bad-a-problem-is-quarterly-capitalism.html http://marginalrevolution.com/marginalrevolution/2015/07/how...

protomyth 11y ago

Do you have a 401K or IRA? Do you pick your funds based on long term company fundamentals or how much the fund is returning year after year? Does your HR department hear from employees that the companies they picked to run their accounts are not performing each year?

JustSomeNobody 11y ago

A few short years from now Qualcomm won't actually produce anything. Instead it'll just license their patents. Yet another company that won't actually "make" stuff. Eventually it is all going to come crumbling down.

secondox 11y ago

come on Qualcomm is a US company, just doing what everybody else does the best: layoff when the diaper is wet.