People who know about the situation say that Intel Corp. plans to lay off many people, probably in the thousands, to save money and deal with a slowing personal computer market.
People who asked not to be named because the talks are private said that the layoffs could be announced as early as this month. The company plans to move around the same time as its third-quarter earnings report on October 27. As of July, the company that made chips had 113,700 employees. People say that about 20% of the staff in some divisions, like Intel’s sales and marketing group, could be let go.
Intel’s main business, making PC processors, has seen a sharp drop in demand and it has been hard for the company to win back market share lost to competitors like Advanced Micro Devices Inc. In July, the company said that sales in 2022 would be about $11 billion less than it had thought.
Analysts think sales will drop by about 15% in the third quarter. And Intel’s once-enviable profit margins have shrunk. They are now about 15 percentage points smaller than they were in the past when they were around 60%.
During its earnings call for the second quarter, Intel said that it could make changes to make more money. Pat Gelsinger, the CEO, said, “We are also lowering core expenses in the calendar year 2022 and will look for more steps to take in the year’s second half.” Intel, which has its headquarters in Santa Clara, California, didn’t say anything about the layoffs.
The most recent significant round of layoffs at Intel occurred in 2016 when the company eliminated over 12,000 positions, equal to 11% of its total workforce. Since then, the corporation has stopped fewer positions and closed vital departments, including the ones responsible for its cellular modems and drone operations. When market circumstances deteriorated earlier this year and fears of a recession intensified, Intel, along with many other corporations in the technology industry, froze its hiring practices.
According to a research note written by a Bloomberg Intelligence analyst named Mandeep Singh, the most recent round of layoffs is likely to lower Intel’s fixed expenses by between 10 and 15 percent. According to his projections, the expenditures will run at least $25 billion and up to $30 billion.
Since taking over as CEO of Intel a year ago, Gelsinger has been actively attempting to reestablish the company’s status as a venerable institution in Silicon Valley. But even before the PC market dropped, winning was a difficult battle. In recent years, Intel has seen a decline in its culture of innovation, which the company’s top executives have acknowledged. Intel possessed a significant technological advantage in the industry.
Now, those issues are being compounded by a more widespread slowdown. Intel’s PC, data center, and artificial intelligence departments are battling a slowdown in technology spending, which is putting pressure on the company’s revenue and profit.
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IDC says PC sales fell 15% from last year to the third quarter. HP Inc., Dell Technologies Inc., and Lenovo Group Ltd., all of which make laptops and desktop PCs with Intel processors, saw their stock prices drop sharply.
Singh said that since PC prices are staying the same and demand is falling, Intel may need to cut its dividends to compensate for cash flow problems. But Intel’s plan to sell shares of its Mobileye business, which makes technology for self-driving cars in an IPO, may ease these worries, he said.
Intel has to lay off workers at a terrible time. This year, the company worked hard to pass a $52 billion chip-stimulus bill, promising to make more things in the US. Gelsinger is planning a building boom that will include putting the largest chipmaking hub in the world in Ohio.
At the same time, investors are putting a lot of pressure on the company to keep making money. The company’s stock has dropped by more than 50% in 2022 and fallen by 20% in the last month.
Tuesday in New York, the shares fell 0.6% to $25.04.
Tensions between the US and China have also clouded the future of the chip industry. Friday, the Biden administration announced new restrictions on exports, which limit what US companies can sell to Asian countries in terms of technology. When the news came out, shares of chipmakers fell again. Intel’s stock dropped 5.4% that day.
Intel has been trying to get back on the market by installing new PC processors and graphics chips. A crucial part of its strategy is to sell more chips to data centers, where competitors AMD and Nvidia Corp. have made inroads. On Tuesday, Google showed off new technology for its server farms powered by Intel which will help speed up AI tasks.
Intel now wants to go after these goals as a leaner business. After Intel’s most recent quarterly report, the company’s chief financial officer, David Zinsner, said, “There are a lot of ways for Intel to improve and get the most out of every dollar.” He said that the chipmaker expected to have to pay for restructuring in the third quarter, which meant that cuts were coming.
Some chipmakers, like Nvidia and Micron Technology Inc., have said they won’t lay off workers for the time being. But other tech companies, like Oracle Corp. and Arm Ltd., have already been cutting jobs.
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