Although the official unemployment rate, at 5.1 percent in September, is the lowest it has been since March 2008, some companies in the wireless industry are still cutting jobs in the face of weak demand, especially with a slowing Chinese economy and a European market that is struggling to get back on its feet.
The job cuts that have hit the wireless industry this year reflect those macroeconomic challenges as well as the particular trials of individual companies as they revamp their strategies and cut costs as part of turnaround plans.
That's certainly the case at handset makers HTC and Lenovo, as well as Microsoft (NASDAQ: MSFT), which has largely gutted the workforce it acquired from Nokia amid a strategy shift away from smartphones.
Meanwhile, Ericsson (NASDAQ: ERIC) cut jobs as part of a shift to a more software-centric business model. And Qualcomm (NASDAQ:QCOM), pressured by Chinese rivals and slower smartphone growth, also cut some of its workforce.
John Challenger, CEO of Challenger, Gray & Christmas, a major outplacement consulting firm, said that "high-tech product lines can get outmoded very quickly as consumers shift or businesses shift" and as "demand shifts to new technologies."
"Sometimes, the new technologies need different kinds of people, fewer people, and I think that can result in layoffs," he said, especially at "big companies that don't keep up with the times."
Challenger added said that the current Chinese economic slowdown could lead to a recession in China, which might trigger a global recession. While he said it's too early to tell whether that will happen, he said "it doesn't feel to me like it's a short-term thing." Trouble in China could affect network and device vendors that have been banking on LTE network deployments in China for growth, Challenger added.
"It will be interesting to see if these are harbingers of things to come or some kind of temporary slowdown," he said.
Indeed, job cuts this year have spread across wide swaths of the wireless industry. For example, Sprint (NYSE: S) is embarking on a new cost-cutting effort geared toward reducing expenses by as much as $2.5 billion during the next six months. "It is likely that some jobs will be impacted but it's premature to discuss the details as we are in the early stages of the process," Sprint said last month.
Separately, chipset vendor Marvell said in September it is going to undertake a "significant restructuring" of its mobile chipset unit and indicated it is going to get out of the smartphone and tablet processor business. The company said it will cut around 17 percent of its global workforce. It's unclear how many jobs will be cut. Marvell had 7,163 workers as of Jan. 31, according to regulatory filings.
And BlackBerry (NASDAQ:BBRY) said in July it would cut more jobs as part of its efforts to regain profitability under CEO John Chen, and those unspecified number of job cuts came on top of similar cuts announced in May.
With all of that in mind, FierceWireless has compiled a list of the five largest job cutting programs in wireless in 2015 thus far. Here is a look at those cuts:
Ericsson – 2,200 jobs
When Ericsson (NASDAQ: ERIC) said in March that it would slash 2,200 jobs in its native Sweden, mainly in research and development (R&D) and its supply chain, the cuts did not come as a complete surprise. The vendor had hinted in November 2014 that it would look to cut $1.1 billion in costs out of the business, and that job cuts would be a part of that.
The cost-cutting program started this year and will run through 2017 globally. This year, Ericsson said that cuts will mainly target structural improvements in R&D, service delivery and supply globally to boost efficiency and growth in the company. Ericsson said the program includes both job cuts as well as savings in external costs across the company's operations around the world. Ericsson said it will book restructuring charges of between $363 million and $485 million during the next two years, in addition to its normal annual restructuring charges of around $243 million.
As part of the restructuring, Ericsson said it would set up three global ICT centers with a common test and development strategy and methodology for R&D as part of the long-term structural improvements and efficiencies.
The job cuts are part of Ericsson's wider mission to transform itself into a more software-centric company that can take advantage of the convergence among the telecom, IT and media industries. Ericsson is also looking to move beyond its dependence on carriers as customers; the company said that by 2020, 20 to 25 percent of its revenues will come from non-operator customers.
HTC – 2,250 jobs
In mid-August HTC said it would cut 15 percent of its workforce and slash operating expenses by 35 percent. HTC said it would axe around 2,250 jobs by the end of this year as part of its restructuring plan.
To improve its position, HTC said that it will establish new business units as it focuses on premium smartphones, virtual reality and connected lifestyle products. HTC also said that it would produce fewer smartphone models, with a focus on the premium smartphone segment. And as its smartphone sales have slowed, especially in China and in the premiums segment, HTC has pushed into other product areas.
However, HTC's expansion into new product areas has been rocky. In August HTC confirmed that its Vive virtual reality headset will not have a widespread commercial launch in 2015, as initially planned, with the launch slipping into 2016. The delay followed a similar one HTC announced in July for its Grip fitness band, which HTC pushed back so that it could roll out a larger array of health and fitness products.
HTC Chairwoman and CEO Cher Wang said in August that the company needs "a flexible and dynamic organization to ensure we can take advantage of all of the exciting opportunities in the connected lifestyle space." She added that "this strategic realignment of our business will ensure that each product group has the right focus, the right resources and the right expertise to win new markets."
While its turnaround continues, the company is bleeding money. HTC said earlier this month it would post a net loss of around $138 million for the third quarter, compared with a net profit of $18.5 million a year earlier. Most worryingly, HTC said revenue also plunged sharply to around $660 million, down from $1.29 billion in the year-ago period.
Lenovo – 3,200 jobs
Lenovo, like many companies, has been feeling the slowdown in China's economy that has dominated the macroeconomic picture this year. That was likely a contributing factor to the company's decision in mid-August to cut 3,200 jobs in its non-manufacturing workforce around the world. That equates to about 10 percent of its non-manufacturing headcount and about 5 percent of the company's total workforce of 60,000 people.
In May Lenovo said it would need to rework its smartphone strategy in its native China amid a slowing and saturating market there, but pointed to stronger sales through its Motorola Mobility brand. Thing seemed to be doing reasonably well at that point. Lenovo said quarterly sales for its fiscal fourth quarter, which ended March 31, were $2.8 billion in the company's mobile business group, which includes products from Motorola, Lenovo-branded phones, Android tablets and smart TVs. Overall, the company shipped 18.7 million smartphones in the quarter, up 49 percent from a year ago.
However, just a few weeks later, Liu Jun, executive vice president of Lenovo's Mobile Business Group and chairman of the Motorola Mobility management board, stepped down from those roles and was replaced by Chen Xudong, the leader of Lenovo's ShenQi mobile unit focused on selling phones through e-commerce sites. The internal changes seemed to be a precursor for the cuts to come.
Lenovo said it needs "a faster, leaner business model" to take advantage of its position. The company also said its mobile group "will continue to drive the overall mobile business, but will now rely on Motorola to design, develop and manufacture smartphone products." Meanwhile, Motorola cut 500 jobs at its Chicago headquarters, or 25 percent of its Chicago-based workforce, as part of the broader restructuring and layoffs at the parent company. The cuts are affecting all functions and departments at Motorola, though Motorola is still maintaining a presence in Chicago.
Qualcomm – 4,695 jobs
Pressure has been building on Qualcomm (NASDAQ:QCOM) since April, following calls from an activist shareholder, Jana Partners, to break up its chipset and patent-licensing businesses. At the time, Qualcomm dismissed that effort, arguing that keeping them together is in the best interests of shareholders. Yet as spring turned to summer there were signs that major changes were afoot at the silicon giant, with reports in late July that the company might cut more than 10 percent of its workforce.
Then the axe came down. Qualcomm struck a deal with Jana and agreed to cut $1.4 billion in costs, slash up to 15 percent of its workforce, change some of its corporate practices and review whether to split up its chipset and licensing units. The announcement was largely in line with the demands that Jana had spelled out in mid-April.
Qualcomm had roughly 31,300 employees as of its last annual report in September 2014, so a 15 percent cut would imply that Qualcomm will slash up to 4,695 jobs over the next year.
Qualcomm is still reviewing its business structure and has said it will not comment on the review until it is completed, which is expected by the end of 2015. However, Qualcomm President Derek Aberle said in early September that splitting the company up might not create value for shareholders.
As part of the cuts, Qualcomm has slashed 1,314 full-time jobs at its San Diego headquarters and hundreds of jobs in other locations. As of May, the silicon vendor employed about 15,000 full-time, part-time and temporary workers in San Diego, according to the Union-Tribune. Qualcomm also confirmed that it slashed 158 jobs in Boulder, Colo., 130 jobs in the San Francisco Bay Area and 65 in Andover, Mass. However, Qualcomm declined to say last month how many jobs it is cutting at its dozens of international locations, so the numbers revealed so far do not reflect all of the cuts the company has made.
Microsoft – 7,800 jobs
About a year after it announced 18,000 job cuts, including 12,500 former Nokia (NYSE:NOK) workers, Microsoft (NASDAQ: MSFT) said in July it would cut another 7,800 jobs, mostly from its phone business, and record an impairment charge of around $7.6 billion related to its purchase of Nokia's devices and services business.
As part of its cuts, Microsoft in August closed down Nokia's former handset product development unit in Salo, Finland. Microsoft also reiterated that it plans to cut 2,300 of its 3,200 employees in the Nordic country.
Microsoft's latest job cuts came less than a month after Microsoft said its top devices executive, Stephen Elop, would be leaving the company. Elop, a Microsoft executive who had been CEO of Nokia, returned to Microsoft when the software giant completed the Nokia deal. Jo Harlow, the head of Microsoft's mobile phone business, also left the company.
The layoffs and restructuring laid bare that Microsoft's blockbuster deal for Nokia's handset business, which closed in April 2014, was not working out as planned. According to research firm Gartner, Microsoft captured 2.5 percent of the global smartphone market in the second quarter, down from 2.8 percent a year ago.
However, after the cuts were announced Microsoft CEO Satya Nadella reaffirmed his commitment to the smartphone market. "I view the mobile opportunity, even today in its broadest sense, and in the future, as being richer," he said.
Indeed, Microsoft continues to build high-end smartphones; the company recently announced the new Lumia 950 and 950 XL. But Microsoft's goal is no longer to capture market share from iOS and Android. Instead, the company is working to get its services onto as many platforms as possible. The company is also working to spur wider adoption of Windows 10, which the company's executives hope in turn will lead to more apps being created for the platform, including by developers who have been creating apps for competing mobile operating systems.