
Qualcomm lays off 15% of its workforce, succumbs to cult of shareholder value - RachelF
http://www.extremetech.com/computing/210758-qualcomm-will-lay-off-15-of-its-workforce-succumbs-to-cult-of-shareholder-value
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golergka
But shareholders are people who actually own the place. And if you own
something, you are in charge: even if you own something collectively, and hire
a manager to make immediate decisions, you have the power to [collectively]
tell that manager what do you want him to do.

Abstract "business inetersts" only serve to earn money to business's owners in
the end. Being a market leader is only a means to an end of making money for
the owners. If the people who own the place decide, for whatever reason, that
they don't need long-term development and want quick money now instead, let
them be: it's their decision to make.

Now, it is possible that shareholders don't act in their true interests, and
they should be thinking about long-term value instead, because that way
they'll earn more money in the end. But it's them who you need to convince of
that, and the argument should be structured completely differently. Blaming
CEO of the company forthe fact that he does exactly what his collective bosses
tell him to do, instead of thinking of abstract "business interests" (that
exist just to earn money to his bosses) and employees (to whom his company is
responsible only in the extents of their employment agreements) is ridiculous.

~~~
simonh
Except in practice shareholders are not a cohesive organisation capable of
effectively directing the strategy of the company. That's why companies have
managers. Nobody is saying that improving shareholder value is a bad thing,
just that it should be sustainable and be based on genuine business
fundamentals and not short termism. Think of it as consumer protection. If
share values are driven up by short term financial tricks, new shareholders
are being ripped off. The role of regulation here is to make sure that
apropriate controls and disclosure is in place to make sure that those
prospective new shareholders have the information they need to apropriately
value what they are buying. Yes the onus on them is to research and understand
their investment decisions, but equaly the onus is on the business and
regulators to make sure it's possible for them to do obtain that information
in clear and transparent way and that management incentives and corporate
governanace rules are fit for purpose.

~~~
golergka
> are not a cohesive organisation capable of effectively directing the
> strategy of the company

They don't need to be: they just need to communicate their priorities to that
manager. In this case, they communicated that they value short-term goals over
long-term.

> it should be sustainable and be based on genuine business fundamentals and
> not short termism

Probably. I actually agree on that. My point is, that's shareholder's
decision. And if you want to argue about that, you should talk to shareholders
and explain that they decision hurt themselves. Don't talk to the manager and
say that he's in the wrong, because that's not his level of responsibility.

> If share values are driven up by short term financial tricks, new
> shareholders are being ripped off.

Shareholders, by buying and selling the share values, dictate them. So, they
are ripping off themselves. Again, I agree with that: but you should talk to
them, not CEOs.

> The role of regulation here is to make sure that apropriate controls and
> disclosure is in place to make sure that those prospective new shareholders
> have the information they need to apropriately value what they are buying.
> Yes the onus on them is to research and understand their investment
> decisions, but equaly the onus is on the business and regulators to make
> sure it's possible for them to do obtain that information in clear and
> transparent way and that management incentives and corporate governanace
> rules are fit for purpose.

I must admit, I read the article on my phone, so I may have missed it, but did
this discussion involve regulations?

~~~
JohnTHaller
Public shareholders value "short term goals" over everything else including
ethics, legality, fairness, product quality, long-term viability, R&D, worker
compensation, work-life balance, etc.

~~~
golergka
OK, that's their fair right to do so. It's not their responsibility to worry
about these things, thank g-d. If you think that they don't serve their own
self-interest, plead to them. If you think that they right to manage their
property should be limited for public good, develop straight and clear
guidelines about that.

~~~
dhimes
It's possible that not all shareholders are aligned. As with employees with
stock: people who want to cash out quickly will want short-term gains, screw
the future. People who want to keep their stock for a while will want long-
term gains, even at the expense of the short-term gains.

~~~
yummyfajitas
Those folks who want long term gains are free to sell their shares at inflated
prices (remember, share buybacks are happening) and spend the money on a
position in a semiconductor company focused on the long haul.

~~~
dhimes
Of course they are free to leave, my point addresses the case in which they
want to stay in _this_ company and direct _this_ company for the long haul.

~~~
yummyfajitas
It's very true that in any group of multiple people with multiple goals, some
folks won't be able to get their way. Similarly, if Qualcomm decided to make
long term investments, the short termers couldn't get what they wanted.

That's one of the beautiful things about shareholder democracy in liquid,
public markets - exit is always an easy option. (Compare and contrast to,
e.g., political democracy, where exit is highly costly and sometimes
impossible.)

~~~
dhimes
Well, shareholder exits can be costly too. But this discussion and the one
with golergka inspired the following idea (probably because the idea of
political democracy came up in both threads).

Stay with me here. It's not fully fleshed out- just kind of a spark: What if,
in some fair way I don't know yet, the employees of a public company had some
(40%? 51%? I don't know but significant) power to force a shareholder to sell
his or her share of the company in a short time frame (30 days?).

This would bring the analogy to political democracy a little closer because
the "subjects" would have the direct power to throw out their "governors." We
could argue that they have the indirect power now (especially in small
companies), but this would make it explicit.

Batshit crazy?

~~~
yummyfajitas
That is pretty crazy. Similarly, imagine if X% of your SAAS vendors could vote
to buy your shares - if Google and Amazon like your business, and if you use
gmail + AWS, they can vote to buy you out and you've got no say in the matter.

Employees aren't "subjects" and their boss isn't their governor. Shareholders
are owners, that's why they get a vote. Employees, SAAS vendors, janitorial
service companies, etc, are just people selling stuff.

~~~
dhimes
I would argue that employees have a larger stake than contractors and vendors.
They would also want to do the right thing by the company. The whole idea is
to broaden the idea of governance to more stakeholders than just the owners.
It would certainly give guys like Carl Icahn pause. On the other hand, perhaps
sometimes what he does needs to be done, and this would make it harder. That's
why the employees should only have a partial say, but enough of one so that
they are a legitimate threat if an activist investor can't muster very much
support on the board.

~~~
yummyfajitas
Employees have no reason to do the right thing by the company - the best thing
an employee can do for himself is get paid all the money. It's hard to see why
their stake is higher than a vendor. In both cases, they have rendered a
service in return for money and have no further stake in the company.

Overall, employee involvement in decisionmaking creates significant
principal/agent problems. Consider this article, which suggests many employees
care so little about shareholder value that they will sacrifice the latter for
petty revenge against third parties (their boss):
[http://www.nytimes.com/2015/06/21/opinion/sunday/is-your-
bos...](http://www.nytimes.com/2015/06/21/opinion/sunday/is-your-boss-
mean.html)

~~~
dhimes
You're right about the vendor thing. I have a hunch that changing a job under
duress is more stressful than finding a new customer (vendor), and thus
employees would be somewhat more inclined to have long term stability, but I
certainly can't prove it and I'm not entirely convinced of it.

As to the idea that employees will sacrifice shareholder value (of which they
have, roughly, zero) in order to feel better about working (revenge feels
good, after all), perhaps that is not unexpected. In my scenario, the
employees would have another outlet: they could make it clear to the board
that they won't tolerate toxic managers. As things stand, a smart board (I
would argue) understands this today, but things get awfully muddy in the real
world.

What the proposal does is broaden the conversation from just considering
shareholders to another group of stakeholders.

------
rayiner
Teeth gnashing about short termism among investors aside, there may be a
practical reason for this move. Apple and Samsung are both moving to their own
micro-architectures. Apple has been using an in-house design since the A6, and
Samsung's 64-bit ARM core will likely drop in the next year or two (the M1).

Doing your own CPU architectures is a phenomenally capital intensive business,
and Qualcomm may not feel positioned to keep up. Even ARM is getting left
behind. The A57 is a power-hungry design that has faced major problems with
thermal throttling in many designs. The amount of cash Apple and now Samaung
can throw at their custom designs may be overwhelming.

~~~
higherpurpose
That's nonsense. First off, ARM is able to "keep up" with only tens of
millions in profit a year. Second, Qualcomm is one of the richest chip makers.
Third, Samsung hasn't been using custom CPUs and GPUS - at all.

~~~
JustSomeNobody
Exynos isn't a custom chip?

~~~
rayiner
Qualcomm's Krait and Apple's Swift/Cyclone are ARM compatible cores designed
in-house from the ground-up. Exynos uses IP cores designed licensed from ARM.

------
faragon
So they're going to cut their CPU R&D and become a generic ARM IP integrator,
plus their GPU and radio-frequency circuits (Adreno GPU, GSM, WiFi, GPS). Next
moves could be discarding their own GPU for the ARM generic ones (Mali) and
using 3rd party IP for the radio. Scary.

~~~
higherpurpose
Which is funny because the reason Qualcomm screwed up recently (besides all
the anti-competitive/antitrust issues) is because it didn't come out with its
own next-generation custom CPU core sooner, and had to use stock ARM IP which
I guess it didn't have much experience in handling.

The shareholders' "solution" is what will destroy the company. Qualcomm
would've been fine in the next 2 quarters, once it passed the Snapdragon 810
generation.

I don't know why they freaked out so badly after just one bad quarter (and
after Qualcomm has constantly grown for the past 5 years) to the point where
they want to split the company. That seems rather crazy. I wonder if there's
something else besides next-quarter-profit thinking behind this motivation.

~~~
fpgeek
If you believe the article (I'm not sure whether or not I do), the
shareholders didn't freak out because of the bad quarter - it was just an
opportunity to push their pre-existing agenda of prioritizing returning
capital to shareholders instead of investing in the business. If that happens
to destroy the company in the long run, these shareholders might not care -
nothing stops them from selling their shares well before the long run arrives.

------
bryanlarsen
You may complain about quarterly capitalism, but studies show that investors
with a short time horizon do better than investors with a longer one.

[http://marginalrevolution.com/marginalrevolution/2015/07/how...](http://marginalrevolution.com/marginalrevolution/2015/07/how-
bad-a-problem-is-quarterly-capitalism.html)

------
bhouston
This is actually about Qualcomm not being g a provider of CPUs to either apple
and Samsung who basically is. The cellphone market if you are not in those
phones you are fighting for scraps. This was a necessary move.

------
steve19
I hate the term "activist investor", "robber baron" or "corperate raider" is
more apt in so many cases.

~~~
jbb555
Or perhaps "owner" would do. It might not be what you would like but they own
the place so it's their right to do what they like with it. Of course when
they ruin it, it just opens up competition for more enlightened compaies so
it's not all bad,

~~~
fpgeek
"Owner" is usually an overstatement. Yes, an activist investor has to own some
chunk of the company (and it has to be a big enough chunk that management will
pay attention to them), but they don't own the whole thing - or even a
controlling interest. If they did, they wouldn't need to be activist, they'd
just fire the existing board and management and hire people that would do what
they want.

Instead, activist investors own a small, but large enough chunk, advocate for
what they want and rely on other investors being passive (e.g. because a lot
of the company is owned by tiny slivers of much larger portfolios) even if
what they're advocating isn't in other investors' interests.

~~~
golergka
If you're passive, it means that you don't have any opinions that you want to
fight for and you are OK with other people making the decision.

------
JustSomeNobody
A few short years from now Qualcomm won't actually produce anything. Instead
it'll just license their patents.

Yet another company that won't actually "make" stuff. Eventually it is all
going to come crumbling down.

------
protomyth
Do you have a 401K or IRA? Do you pick your funds based on long term company
fundamentals or how much the fund is returning year after year? Does your HR
department hear from employees that the companies they picked to run their
accounts are not performing each year?

------
secondox
come on Qualcomm is a US company, just doing what everybody else does the
best: layoff when the diaper is wet.

