Ahead of today’s Q1 2016 earnings release and call, Intel has announced that they are going to be cutting a significant number of jobs over the next year. The job cuts come as part of Intel’s larger and ongoing restructuring efforts, as the company grapples with an overall soft PC market and continued struggle to carve out a larger piece of the mobile market. Ultimately Intel’s looking to invest in what they consider to be high-growth areas, which means laying off employees in stagnant business units while making other investments in those areas that are seeing continued growth.

The job cuts themselves are expected to involve up to 12,000 employees, or about 11% of the company’s workforce. Intel will be eliminating positions through a combination of both voluntary and involuntary layoffs, and in the process will be consolidating the remaining workforce and their respective sites. Intel expects the bulk of the layoffs to occur within the next 60 days, with the entire process stretching into mid-2017.

The company’s pre-earnings announcement does not state where these layoffs will come from, and we’re expecting at least some additional detail to come out of the company’s earnings call which is still on-going. However the company is reiterating what markets and businesses they see as growth opportunities and will be investing into for the future, which offers some basic guidance on what the company sees as their most important businesses. Intel’s Data Center and Internet of Things businesses are specifically being cited as their stand-out businesses, which combined with memory and FPGAs provided 40% of the company’s revenue and a majority of their operating profit. Meanwhile in the consumer/client market Intel has seen good returns on 2-in-1s, gaming and home gateways. Conversely, the overall (client) PC market is still in decline, and I expect that a number of the cuts will be centered on that.

Finally, Intel has also detailed the costs of their restructuring. The company will incur a one-time charge of $1.2 billion in Q2, with this presumably being a significant number of severance payments. In turn, the company expects to save $750 million this year, with an annual run rate savings of $1.4 billion per year after the last of the layoffs are completed in mid-2017.

We’ll update this article later today with more information once it comes out of Intel’s earnings call. Ultimately the soft PC market has been a continuing trend for Intel over the past few years, so that we’re seeing Intel react to it now is not unexpected. However it will be important to see just how the layoffs are organized – for example, if Intel makes much in the way of cuts in the fab business – as Intel is a large company. What this means for future client PC investments, mobile, could prove to be significant.

Update: Intel's earnings call has shed a bit more light on the restructuring, but Intel is not spelling out exactly where the bulk of the cuts are coming from at this time.

Overall Intel did reiterate that although the client business has been weak, the company's restructuring plans will be touching more than the client business. The impact to the client business then is that it is being refocused via the restructuring, hence the earlier comments on what Intel sees as the client growth markets. Undoubtedly aspects of the client business are in the crosshairs given the continued slowness in the market, but Intel isn't saying too much more than that.

The company has also made it clear that they're not backing off on fab/manufacturing investments in the near future. Capital expenditures on 10nm and 3D NAND continue untouched even with the restructuring, and overall Intel's technology cadence plans have not changed. Farther ahead, the company has indicated that they are being mindful of their capable competition, and that they need to stay ahead of them, including getting back to a two-year cycle if at all possible.

Finally, Intel has offered a bit more information on the timeline for the restructuring itself. While the majority of the notices to employees will go out in 60 days, the projection is that only about half of the layoffs will be completed by the end of this year, which implies the rest will happen in H1 2017. Part of this comes down to the fact that while Intel has a target number for employment, they have not decided whether they will end any product lines entirely. Intel is in the process of undergoing a complete review of the business to identify any products the company may want to cease, and Brian Krzanich has said that when the review is done there's likely to be a few products that get flagged.

Source: Intel

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  • Gigaplex - Tuesday, April 19, 2016 - link

    "Intel expects the bulk of the layoffs to occur within the next 60 days, with the entire process stretching into mid-2017."

    Knowing you've got roughly a 1 in 10 chance of getting laid off in a drawn out process spanning a year or so can't be good for morale.
    Reply
  • bji - Tuesday, April 19, 2016 - link

    Employees who pull their own weight don't worry. Reply
  • name99 - Wednesday, April 20, 2016 - link

    Hmm. How well have companies that implement your Darwinist theory of management worked out?
    Microsoft and Dell used Stack Ranking, to notoriously bad effects in both cases. Enron went all-in, to the extent that the company essentially became a criminal enterprise.
    Reply
  • Murloc - Wednesday, April 20, 2016 - link

    stack ranking hits single people and destroys teamwork.

    You can apply darwinist management by talking to bosses and seeing who works best considering everything, including team leadership. The problem is that it's not easy to measure.
    Reply
  • Krysto - Wednesday, April 20, 2016 - link

    Except this looks like it might be division-based, not performance-based. So if you're entire division is wiped out, it won't matter how good you are. Reply
  • MrPoletski - Wednesday, April 20, 2016 - link

    hic

    more ale anyone? hic
    Reply
  • BurntMyBacon - Thursday, April 21, 2016 - link

    @Gigaplex: "Knowing you've got roughly a 1 in 10 chance of getting laid off in a drawn out process spanning a year or so can't be good for morale."

    The article address that for you. (In the update perhaps)

    @Article: "While the majority of the notices to employees will go out in 60 days, the projection is that only about half of the layoffs will be completed by the end of this year"

    Looks like they'll know pretty quickly. Also, assuming a 5% turnover rate and given that only half of the 11% reduction will take place this year, this is starting to look a lot more like a targeted turnover freeze + the 1% of employees that aren't getting the job done. That said, I've seen voluntary layoffs backfire on companies before. They invariably end up loosing someone that they would rather have kept around.
    Reply
  • phatboye - Tuesday, April 19, 2016 - link

    Didn't intel have a 20,000 employee layoff about 7 or 8 years ago? is this going to be a repeating cylce where Intel hires a bunch of people then lays them off before they hit retirement age? Reply
  • Ryan Smith - Tuesday, April 19, 2016 - link

    The 2006 layoff was roughly 10K people, IIRC. Reply
  • Samus - Tuesday, April 19, 2016 - link

    The thing is, Intel, like HP, when they have layoffs, it doesn't affect the "lifers" like most other companies. I know people who work at each company in Oregon and Texas and they've been there for 10-15 years and know people who have been there for 30+ years. The boards are still very old school at these companies and actually respect keeping the aging population around, because in a lot of ways, experience, especially in physics and engineering, is priceless.

    I also think it's fascinating both companies offer PAID paternity leave for fathers. I'd never even heard of that before my buddy at Intel had his first child.
    Reply

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