Qualcomm: Fire The Engineers, The MBAs Will Save Us

qualcommSee page for author [Public domain], via Wikimedia Commons

Yesterday, we broke the news that Qualcomm was all set to become the patent troll to end all patent trolls. Well, we’re still trolling Qualcomm today.

It’s no secret that JANA Partners is pushing the company for a split. The tech giant is “exploring” such options. It’s also firing some 20% of its workforce, including the engineers that helped build up its “valuable” patent portfolio. Something that’s a bit overlooked.

Cost cutting doesn’t help fix its declining business. Neither will splitting up the company. The company is well off the mark with Snapdragon and the loss of the Samsung S6 design is just the beginning. We’ll see if Qualcomm can get back in the saddle with the S7.

The real fix is in Qualcomm’s board, which is well tenured and been handing out dilutive compensation packages like…

Well, the issue is that it takes engineers to build products and patents. Much like the R&D conversation at DuPont, it takes a relatively high cost to build and develop smartphone tech.

No one expects Barry Rosenstein to understand this. After all, a Wharton MBA has nothing to do with engineering.

Recall when Google’s Larry Page told Khan Academy founder Salman Khan that his MBA should go “sit with the engineers” because the MBA approach to building things was stupid – after reviewing a product plan presentation written by an MBA without any tech cred

Barry’s answer has been to raise debt and deploy that cash for buybacks. Something that only modestly aims to curb the excessive dilution in shares we’ve seen from executive compensation packages over the years. Spending money on buybacks is a great idea, when you have growth opportunities in place and meaningful runway. When you don’t, well, that’s some short-term financial engineering at its best. Don’t forget – sign up for our free daily newsletter to stay in the activist investing know.

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13 Comments on "Qualcomm: Fire The Engineers, The MBAs Will Save Us"

  1. Why do engineers believe that a 1 or 2 year MBA degree somehow qualifies them as an expert (or even as competent) in business? Is it because the schools tell them so? A business degree is in every way as specific a set of skills, which take years to cultivate, as an engineering degree. As I have both a degree in IE and in business, I believe I speak with some understanding. Let engineering drive the tech and keep the bean counters off their backs. Then let the business division determine the direction the company should take and help the engineers to meet those goals.

  2. I used to work for Qualcomm as an FPGA & ASIC engineer (part of the computer hardware engineering field if you’re not familiar with those terms). I was there from 2007 through 2012. When I started there, they were an innovative company providing great pay & benefits looking into new cellular & mobile communications technologies which is why I started out as a contractor and eventually converted into a full-time employee. Until about 2010-2011 or so, I felt like I was doing some original and interesting stuff. But by late 2011 – early 2012, I felt like I was just “recycling” old stuff from their library of components and connecting it in different ways. In other words, I went from creating building blocks of my own to just playing with pre-designed blocks that other engineers had done earlier. It got boring, so I left.

    The pay was great and the benefits were terrific (especially the medical plan – better than what I have now). But I sure don’t miss the terminal boredom I was experiencing during my last year or so there.

  3. If North American Engineers had no value why is the world trying to hack into that RD ? In the end Lawyers and MBA will find they just D’s without any balls to back them up. Like Great Britain they traded everything for USA help in world war 2 and needed old ships repaired in Philadelphia shipyard.

  4. Promoting engineers to management based on technical merit alone is often counterproductive, indeed – especially, if they don’t have the character and training to do well in a competitive business setting, and do not appreciate the irrationality and chaos of the world around them.

    My point was that those selected for leadership roles should come from a scientific background, which is rather different from the culture that seeds the B-schools and the managerial ranks. It’s not that companies who do this outperform – it’s the individuals who can make the transition transform industries and reinvent society.

  5. It seems that the ‘value added’ concept has gone out of the US economic formula. There was a time when a company produced products that had intrinsic value. The product was then purchased for its value and used by a consumer. It seems now that companies are outsourcing more and more of the production of intrinsic value items to foreign locations and trying to replace it with the virtual value of the profit and stock value of the company.

  6. There needs to be a good balance of both engineers/scientists and MBA’s working together to make a company successful. I’ve worked at companies that promoted the best, brightest and most capable engineers into management positions only to watch those companies fail for not “taking care of business”.

  7. Dying company. Its best days are long behind it. No worries however. Jr. Jacobs and his frat buddies are set for life.

  8. Finance is a sub-specialty in management science, and actually a quite useful one in a large enterprise. So, nothing against finance MBAs whose job it is to keep the books, manage cashflows, and so forth. Ditto against the handful of Wall St bankers who make the capital markets work (more or less :)

    However, the run of the mill MBA is not a finance type, just a “general manager”. These are people who, knowing that they have no redeeming skill, go to business school and join a buddy system where they make decisions that are way above their intellect, knowledge, or pay grade. The US business environment is weighted down and dumbed down with a huge mass of such people who do not really add value proportionate to their compensation or reputation.

    The people who lead the top tech companies (significant but not all that large fraction of the US corporate cadre) are not really representative of that “business bulk” you have in the economy at large.

    My point was, IMHO – managers/executives should be recruited from the engineering/science/creative demographic. There are tons of technical people with the requisite skills (which are not all that difficult to cultivate). It’s much easier to teach management to a good engineer than to teach our “management material” base stock how to think.

  9. ImperatorMachinarum | Jul 26, 2015, 2:45 pm at 2:45 pm |

    I too sometimes malign MBAs. It’s too easy. Right?

    But it’s not fair nor just. A lot of MBAs are very smart people from excellent schools. It’s not always their fault that they’re put into positions where they cannot succeed. Especially where general management expertise is confused with leadership and technology skills.

    Ideally, there’s a balance between applied expertise and general financial management. MBAs actually can do well when it comes to fiscal discipline.

    Finally, people should vote with their feet. Leave if you don’t like financial engineering oriented leadership. That’s happening at IBM. In contrast, that’s why Google and Facebook, even Oracle and SAP, attract employees…these latter all having MBAs whom serve a useful purpose.

  10. ImperatorMachinarum | Jul 26, 2015, 2:11 pm at 2:11 pm |

    This is an excellent and even brave article. Not many writers are willing to tackle this issue. Indeed, financial engineering oriented leadership is hurting many companies, exactly due to ignorance of what product development entails.

    But I wouldn’t say it’s because we choose football players as leaders. Far from it. We’re actually allowing intelligent MBAs from excellent schools to much latitude and too much credit. Fortunately, in many technology companies, as this article attests, engineers and mathematicians are standing up to this.

    There’s a difference between Google and IBM in this context.

  11. Executives at Asian or European companies are all former techies who have proven themselves in their area of expertise and come from top schools with top grades. Only in America we choose our leaders based on their football prowess. Look where it has taken us in the last few decades – the nations of the world are eating our lunch and are laughing at us.

  12. Business value is created by engineers/scientists. Those with additional knack for management become OWNERS.

    MBAs are dead wood. They are like the parasites who take over an organism and suck it dry before leaving to reproduce themselves and infect more hosts.

    I will never hire an MBA who does not come from a solid science/engineering background.

  13. We know GM was run by a financial guy between 1995 thru 2008. The company continued to build 8 cylinder inefficient low mileage trucks at a time when gasoline was going up in price . at the same time Toyota was run by a mechanical engineer and successor of the past CEO. The company designed Prius and more environmental family vehicles. we all know the rest history. If history is any guide, Qualcom should avoid doing the same mistake and hire innovators who can come up with what consumers want to survive else we investors have no problem making money both ways…….

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