SAN DIEGO (CBS 8/CNS) - On Wednesday, San Diego-based tech giant Qualcomm announced the layoff of about 4,500 employees, which accounts for nearly 14 percent of its workforce.
The cuts are expected to save the company around $1.1 billion.
"We are making fundamental changes to position Qualcomm for improved execution, financial and operating performance," said Steve Mollenkopf, CEO of Qualcomm. "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."
The firm will also eliminate $300 million in stock-based incentives.
Qualcomm's financial report for the third quarter showed a net income of $1.2 billion, down 47 percent from the same period last year. The sum was 12 percent higher than the second quarter, however.
The company reported earnings per share of 73 cents, compared to $1.31 last year, and 63 cents in the second quarter.
The company also reported revenue of $58 billion in the third quarter, a 14 percent drop from the same time last year, and 15 percent less than the second quarter.
The company has 31,000 staff members around the world and nearly half are based in San Diego. Two-thirds of those employees are engineers. The layoffs could impact all business sectors.
Analysts blame fierce competition from Apple's iPhone, regulatory issues in China and losing a key chip for Samsung's most popular smartphone.
The billion dollar company generates profit by selling chips that power smartphones and through tech licensing for wireless patents.
San Diego State Professor Ameritus, Tony Cherin, said despite Wednesday's news, he does not envision the local economy will be impacted because the affected employees only represent a small portion of the population in San Diego.
Financial adviser and asset management expert Brent Wilsey said Wednesday's news represents only the beginning of even more changes ahead for Qualcomm and believes the company is in financial trouble.
"Qualcomm's licensing division is doing well. They actually grew there in their earnings. However, the chip side is doing terrible because of the competition. It would not surprise me six months from now we see more layoffs announced."
"They will have to find other jobs and it's going to be hard in San Diego because Qualcomm I believe is one of our biggest employers and biggest tech employers. Most of your tech companies are in Northern California so they may have to move and have to relocate to find the same type of job unfortunately."
A review of its corporate structure will be completed by the end of this calendar year, according to Qualcomm. Plans also call for streamlining the engineering organization, reducing the number of offices and increasing resources in lower-cost regions.
Qualcomm additionally announced that it added two new board members, Mark McLaughlin and Tony Vinciquerra, and that one more director will be
appointed later.