Qualcomm cuts workforce by 15%; stock turns down

Qualcomm's profit drops
Qualcomm's profit drops

Qualcomm announced Wednesday that it would cut its workforce by about 15 percent contributing to a total of $1.4 billion in cost reductions. It also announced changes to its board and executive compensation. (Tweet This)

The San Diego-based chipmaker said it would be reviewing structural alternatives to splitting the company. Reports surfaced earlier this week that Qualcomm could spin off its less profitable chip business, according to sources cited by The Wall Street Journal.

Shares were up as high as 2 percent in extended trading before reversing to a drop of nearly 2.5 percent.

Qualcomm also delivered quarterly earnings Wednesday that beat analysts' expectations, although revenue came in at a slight miss.

The technology firm posted fiscal third-quarter earnings of 99 cents per share on $5.83 billion in revenue. Wall Street had expected 95 cents a share on revenue of $5.85 billion, according to consensus estimates from Thomson Reuters.

"We are making fundamental changes to position Qualcomm for improved execution, financial and operating performance," said CEO Steve Mollenkopf in a press release. "We are right-sizing our cost structure and focusing our investments around the highest return opportunities while reaffirming our intent to return significant capital to stockholders and refreshing our board of directors."

Qualcomm has reduced the outlook for its semiconductor business for the fiscal fourth quarter, driven by reduced demand and lower sell through in China.

Stick with Qualcomm: Trader
Stick with Qualcomm: Trader

The tech giant, which is one of the world's largest chipmakers, has been plagued by increased competition and reduced guidance recently. As part of the strategic review, Qualcomm will implement an "aggressive" cost-cutting plan to reduce annual costs from its fiscal 2015 levels of $7.3 billion by approximately $1.1 billion. The cost initiatives will come from layoffs, streamlining and reducing the number of offices, the company said.

Qualcomm will also reduce its annual share-based compensation grants by about $300 million. The costs are expected to be completed by the end of fiscal 2016.

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The company also announced a partnership with hedge fund Jana Partners through which three members will be added to Qualcomm's board of directors. The company has been under pressure from the hedge fund to spin off its chip business from its highly profitable patent-licensing business.

Shares of Qualcomm have tumbled more than 20 percent over the past 12 months.

—Reuters contributed to this report.