Intel slashes 10,500 jobs in $3 billion cost cut restructure

Stan Beer
Wednesday, 06 September 2006 09:45

IT Industry - Strategy

Chipmaking market leader Intel has announced massive staff cuts of 10,500 positions, with 7,500 jobs to go before the end of the year and the axe to fall on another 3,000 by mid-2007. Intel believes that the 10% downsizing to 92,000 staff will save the company US$3 billion a year by 2008, and US$2 billion in 2007.

The expected announcement comes on top of announced cuts of 1000 management positions in July.

In a release to the market, the company stated: "The savings are a combination of non-workforce related steps and a significant reduction in Intel's workforce. The company's employee population will decline to approximately 95,000 by the end of this year, resulting from workforce reductions, attrition and previously announced actions. The workforce will decline to approximately 92,000 by the middle of 2007 – 10,500 fewer than the company's employee population at the end of the second quarter of 2006. In addition to the savings from the workforce reduction, the company expects savings in merchandising expenses, capital and materials."

Intel president and chief executive officer Paul Otellini had flagged his intention to trim dead wood from the company earlier this year, saying that he intended save US$1 billion.

“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 Otellini.

The current rounds of cuts were made known last week with expectations that positions would go in marketing, middle management and areas outside of the company's core processor and chipset businesses.

Intel has confirmed today that most job reductions this year will occur in management, marketing and information technology functions, reductions related to the previously announced sale of businesses, and attrition. In 2007, the reductions will be more broadly based as Intel attempts to make improvements in labor efficiency in manufacturing and equipment utilization, eliminates organizational redundancies, and improves product design methods and processes.

The company expects severance costs to total approximately $200 million, offsetting some of the expected savings from the project's implementation.

Intel has been steadily losing marketshare over the past two years to its much smaller Silicon Valley neighbour and rival AMD, which has gained a foothold in the majority of the major computer manufacturers, particularly in the server and high-end desktop areas.