QUALCOMM COULD MERGE WITH INTEL following a glut of problems, including the announcement that it will dump 15 percent of its workforce - about 4,500 staff - and consider splitting into two companies.
Wall Street said that Intel would make the best partner for the chipmaker, and could take over manufacture of the Snapdragon processor if Qualcomm does decide to break itself up.
"The chip deal to end all chip deals," Cowen and Co analyst Timothy Arcuri told Reuters, adding that this would give Intel's smartphone chip making business a turbo boost.
The analyst also said that such a move would allow Intel to expand its footprint in the key Chinese market.
Qualcomm said in its Strategic Realignment Plan on Wednesday that it will shift activity to low-cost countries and consider a break-up as processor demand slows.
The shake-up is much worse than rumours suggested just days ago in a report on The Information, which cited sources "inside and outside the company".
It said that Qualcomm could announce plans to lay off 10 percent of its 30,000-strong workforce, a number that doesn't seem half as bad in comparison.
The mass cull is in response to an almost 50 percent drop in quarterly profit, announced in Qualcomm's third-quarter earnings on Wednesday.
The company said it will also cut spending by $1.4bn, add three new directors to its board, and consider restructuring its operations, such as separating the design and patent-licensing businesses.
"[We have] entered into an agreement with JANA Partners pursuant to which Mark McLaughlin and Tony Vinciquerra have been added to the board of directors and a third director to be selected by the company and consented to by JANA will be added promptly," the firm said.
The move to drop such a substantial amount of its workforce could be down to increasing competition from chip firms such as MediaTek, Samsung, which recently dropped Qualcomm in favour of its own Exynos chip for the Galaxy S6, and other small Chinese companies that specialise in making chips for budget phones.
Qualcomm reported a 46 percent drop in Q2 profits in April, and the sources said that the company could shift more research and development activities to low-cost countries such as China and India to save money.
It's clear that Qualcomm is going to have to make some major changes to its strategy, and quick, because the company's outlook becomes progressively worse as the months roll on.
Qualcomm debunked chatter in April that LG ditched its octa-core Snapdragon 810 chip for the G4 owing to overheating problems. Many scoffed at the firm's decision to go with Qualcomm's hexa-core Snapdragon 808 chip, instead of the latest and greatest Snapdragon 810 offering.
This re-fuelled speculation that Qualcomm's Snapdragon 810 chip has been suffering problems. Qualcomm denied the overheating claims, saying that LG's decision to stuff the G4 with a Snapdragon 808 chip was made "over a year ago" and had nothing to do with the persistent rumours surrounding the 810.
However, a few months later, in June, Sony admitted that its latest Xperia Z3+ is overheating owing to problems with the 810 chip.
Sony acknowledged the overheating after it was detected in tests run by GSMinfo in the Netherlands, which found that the camera app crashed after a few minutes of video recording and that an unusual amount of heat was felt on the rear of the device.
The Japanese firm said that it will release a software fix in the summer to tackle the fault, which is a known problem seen in other handsets powered by the processor.
But that's not the end of Qualcomm's problems. Earlier this month, the chipmaker found itself under the watchful eye of the European Commission which launched two investigations into the US chipmaker's alleged anticompetitive practices.
The first investigation will examine whether Qualcomm abused its dominant market position by offering financial incentives to customers on the condition that they order its baseband chips exclusively.
The second will look at whether Qualcomm engaged in "predatory pricing" by selling 3G chips well below cost in a bid to force competitors out of the market. µ
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