Intel announced Sept. 5 it would cut more than a tenth of its workforce as part of a drive to become more efficient in the face of tough competition in the computer chip market. The world's leading computer chip maker had a payroll of 99,000 people worldwide prior to the much-anticipated announcement that it would lay off approximately 10,500 workers.
"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," said Paul Otellini, Intel's CEO.
Intel said its workforce would decline to 95,000 by the end of this year as a result of staff reductions, attrition and previously announced layoffs. By mid-2007, the Intel workforce would drop to about 92,000 employees, 10,500 fewer than the company's staffing level at the end of the second quarter of 2006.
The chipmaker also planned to cut costs in merchandising, capital and materials, according to Intel spokesman Mark Pettinger, to generate savings of approximately $2 billion in 2007. In 2008 the company expects savings from this restructuring to grow to approximately $3 billion annually.
In July Intel shuffled management on the heels of a lackluster earnings report and the laying off of 1,000 managers at its facilities worldwide. "It is streamlining the bureaucracy," Pettinger said. "It wasn't just about cutting headcount; it was about making Intel a leaner, more efficient company in terms of everything."
Principal analyst Nathan Brookwood of Insight 64 in California called the Intel cuts "a good start" but was concerned that remaining workers would be spread too thin. "The folks at Intel were already giving more than 100% at their jobs," Brookwood said. "Intel needs to cut back on the breadth of products it is working on." For example, Intel re-designs microchip architecture in two-year cycles while the industry average is four, Brookwood noted. Switching to four-year cycles would mean Intel would need fewer engineers.
Intel's drive to trim costs and improve efficiency came as it waged a price war with Silicon Valley rival Advanced Micro Devices (AMD). AMD had begun eating away at Intel's market share before Intel unveiled its family of speedy dual-core Xeon processors in July. AMD responded in August by unveiling fast, energy-efficient multi-core Next-Generation Opteron computer chips it heralded as precursors to a quad-core chip to be released in the middle of 2007. Intel has announced it will begin selling quad-core processors by the end of this year.
Santa Clara, California-based Intel reported a 57% dive in its second quarter earnings this year on weaker demand. It scored a 13 % drop in revenue from the same quarter last year.
Intel revenue worldwide in 2005 was $38.8 billion.
Copyright Agence France-Presse, 2006