Qualcomm CFO Trims Operating Expenses as Industry Faces Down High Inventories - The Wall Street Journal

Qualcomm is moving to trim operating costs and treble down connected caller areas, including its automotive business. WSJ’s CFO Journal spoke to Chief Financial Officer Akash Palkhiwala astir the company’s spending plans, the interaction of higher involvement rates connected its finances and the outlook for 2023. His answers person been edited for magnitude and clarity. 

WSJ: What’s your outlook for 2023? 

Mr. Palkhiwala: There is simply a batch of uncertainty globally. There is the macroeconomic environment, the concern successful the U.S., China and successful Europe, determination is the Covid concern successful China—how agelong that takes to resolve. And mostly successful the semiconductor industry, determination is important inventory for immoderate of our customers.

These factors combined present uncertainty successful the abbreviated term. We are focused connected controlling the things we tin control. 

WSJ: Have you made changes to your forecasting and readying process amid each that uncertainty? 

Mr. Palkhiwala: As we program our adjacent year, we’re doing a batch much [macroeconomic scenario-planning] than we’ve done successful the past—especially connected the downside—and trying to quantify the implications for us. What that truly means for america is we person much scenarios to navigate through.

WSJ: How agelong volition it instrumentality to whittle down those inventories you mentioned? 

Mr. Palkhiwala: A mates of quarters is what we deliberation it takes for it to get to a amended place. It’s precise emblematic successful our manufacture wherever you spell done inventory physique and bleed. Especially connected the backs of proviso constraints, it is nary astonishment that [original instrumentality manufacturers] ended up gathering a small much inventory and present the proviso constraint has decidedly gone away. 

WSJ: How bash you deliberation astir spending successful 2023? 

Mr. Palkhiwala: One of the archetypal things we are doing is we are reducing spending successful the much mature areas of the concern and redirecting those resources and those dollars to [automotive and Internet of Things], due to the fact that that’s wherever a batch of our maturation is driven by. In summation to that, we are making prime caput number reductions successful definite functions. The 3rd happening is that we are preparing contingency plans. So if we request to instrumentality further action, we’ll beryllium acceptable to bash that.

WSJ: So you are slowing hiring arsenic good arsenic making selective cuts? 

Mr. Palkhiwala: It’s a operation of those 2 things. We evidently person targets crossed our businesses wherever we are expanding spend, but determination are different areas wherever we’re reducing walk significantly.

WSJ: You issued astir $3.4 cardinal successful caller indebtedness successful 2022. How acrophobic are you astir rising involvement rates? 

Mr. Palkhiwala: The issues were truly to regenerate galore mature aging bonds. We had really locked successful rates a mates of years ago. And truthful that evidently helped america a batch due to the fact that we could support ourselves [against] the caller summation successful rates. While the coupon connected the papers would amusement a higher rate, since we had locked successful rates, we spot the payment of the complaint locks coming through. The adjacent maturities travel successful 2024 and past successful 2025. We’ll spot however the complaint situation changes betwixt present and then. 

WSJ: Ahead of an upcoming maturity, erstwhile bash you look to refinance? 

Mr. Palkhiwala: We program wrong months of a maturing bond. We look astatine the marketplace situation and we effort to optimize it erstwhile we contented it. But we besides person a beardown equilibrium sheet. So if we can’t bash it successful clip and person to bash it a small later, that’s OK with us. 

WSJ: Would you usage word loans oregon commercialized insubstantial successful that case? 

Mr. Palkhiwala: Yes, it’s a operation of those instruments and besides our currency equilibrium connected our equilibrium sheet. 

WSJ: Are determination immoderate affirmative effects from higher rates connected your business? 

Mr. Palkhiwala: When you person a important currency balance, erstwhile the complaint goes up, we besides spot the payment connected the currency equilibrium side. On our debt, astir of our indebtedness is fixed-rate. So you don’t spot the summation successful the outgo connected the indebtedness broadside arsenic much. If we bash extremity up doing caller issuances astatine higher rates, it mightiness inactive enactment america successful a tenable spot with accrued income connected the currency balance.

WSJ: How bash you deliberation astir moving superior successful the discourse of higher rates? 

Mr. Palkhiwala: It’s an important lever to person successful the concern if you tin maximize your currency equilibrium and the income you get connected it. With the summation successful inventory crossed the manufacture and crossed our ain inventory, it’s thing that has captured immoderate of our currency flow. As we spell done 2023, it’s going to beryllium an accidental for us.

Write to Nina Trentmann astatine nina.trentmann@wsj.com