Qualcomm: Layoffs Unrelated to Korean Slowdown

SAN FRANCISCO (06/30/2000) - Telecommunications equipment maker Qualcomm Inc. plans to lay off about 200 workers in the U.S., or slightly less than 3 percent of its total workforce, as part of an effort to streamline operations and increase its competitiveness, a company spokeswoman said Friday.

"We have had to evaluate skill sets against the needs of the business and we have had to make adjustments accordingly," said spokeswoman Diana Baldwin.

The layoffs are being made primarily at the company's San Diego, California headquarters and include regular and temporary employees in technical, professional and administrative positions. The company began notifying the affected workers Thursday, Baldwin said.

Qualcomm Wednesday reported that sales of its chipsets may be lower than expected in the fourth fiscal quarter, due to an expected decrease in phone sales in South Korea caused by the elimination of phone subsidies there. The layoffs are unrelated to Wednesday's announcement, Baldwin said.

Qualcomm said it doesn't expect the news from South Korea to affect third-quarter pro forma earnings, which it is due to report July 19. The company will talk about its fourth-quarter expectations at that time.

As a result of the news from South Korea, First Union Securities Inc. on Wednesday downgraded Qualcomm from a strong buy rating to a buy. The investment firm also reduced its fiscal fourth-quarter earnings estimate for the company from 33 U.S. cents to 25 cents, according to a note issued to investors.

"We are downgrading our rating on the shares from a strong buy to a buy until the situation in Korea resolves itself. We believe the net slowdown in Korea will resolve itself over the next quarter or so," the note said.

First Union's longer term outlook for Qualcomm remains unchanged. "The overall investment thesis is intact and longer-term investors may want to use share price weakness as a buying opportunity," the investment firm said.

The South Korean government at the start of June told wireless carriers in South Korea they may no longer subsidize the price of handsets to subscribers.

Handsets cost $200 to $250 per unit, but, as in the U.S., subscribers pay $80 to $100 thanks to subsidies.

Asia as a whole is viewed as an area of strategic importance for Qualcomm, which hopes to see its CDMA (code division multiple access) technology adopted in emerging markets there, particularly China. Uncertainty about which type of cellular technology will become prevalent there has caused some investors to look twice at the firm.

Qualcomm's shares on the Nasdaq stock market closed Friday at $60, down 2.4 percent from the previous day, and their lowest level since the start of the year.

In a separate announcement Thursday, Qualcomm announced the release of new software that allows users to access the Internet and browse e-mail from handheld computers based on Palm Inc.'s Palm OS. The Eudora Internet Suite (EIS) 1.1 is free for users of Qualcomm's Eudora 4.3.2 e-mail program. For users of most other desktop e-mail programs, access to an additional "unlimited sync" feature of the software is available for US$29.95, Qualcomm said. EIS 1.1 can be downloaded at http://www.eudora.com/internetsuite/.

Qualcomm, in San Diego, California, can be reached at +1-619-587-1121 or at http://www.qualcomm.com/.

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