Qualcomm suffers 50% drop in Q3 profit, to cut spending by $1.4bn

San Diego-based Qualcomm is slashing its annual spending by $1.4 billion and cutting headcount by 15% as part of its restructuring plan. The chipmaker suffered huge losses as it incurred about 50% drop in quarterly profit.

The restructuring plan includes separation of design and patent-licensing businesses, according to The Wall Street Journal.

Qualcomm is confident of business growth in the days to come as it foresees good demand for 3G/4G devices in the global market. The company's CEO Steve Mollenkopf is focusing on improving operating margins by restructuring the costs.

Mollenkopf explained the need for a Strategic Realignment Plan designed to improve execution, enhance financial performance and drive profitable growth.

"The changes we are announcing today are designed to enable us to right-size our cost structure and reposition Qualcomm for improved financial and operating performance", he said in a statement.

Qualcomm promises to continue to build upon its technology leadership position and capitalize on the significant long-term opportunities in order to create sustainable long-term value for stockholders.

The company is also considering repurchasing additional stock in 2016.

"We took a significant step towards our increased capital return commitments through the initiation of a $5 billion accelerated share repurchase as part of our plan to repurchase an additional $10 billion in stock by March 2016," Mollenkopf said.

The total revenues were down 14.7% to $5.8billion from $6.8billion in the previous corresponding period. Operating income dropped 42.8% to $1.7billion from $2.1 billion during the period. The company suffered 45.4% drop in net income as it went down from $2.2bn to $1.2bn. Diluted earnings per share (EPS) eased to $0.73 from $1.31 during the quarter, according to a news release from the company.

Qualcomm has 31,000 full time and temporary staff on its roll. The company has been suffering the slow growth in sales and competition from low-priced products, The stock price dropped by over 15% this year so far. In a response to activist investor Jana Partners, which holds about $2 billion stock in the company, Qualcomm is slashing down the costs.

Qualcomm manufactures chipsets, integrated circuits used in mobile phones. It makes major chunk of profits from licensing its technology.