Intel confirms 15,000 jobs to go across the organisation

Announcement comes as second quarter results show effects of cost reduction

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Pat Gelsinger, Intel

Intel has confirmed it will be cutting 15,000 jobs – about 15% of the organisation – far in excess of pessimistic predictions. The announcement was made with the announcement of disappointing second quarter results from the chip maker.

Revenue for the period was $12.8 billion, down 1% year-on-year (YoY). The balance sheet showed an improvement of revenue for products, led by the client computing group at 9%. However income from data centres & AI and network & edge division was down 3% and 1% respectively. Income for Foundry – it’s independent open system foundry business – also rose 4%. Other sources of income dropped 32% to $968 million largely on the back of the Altera – its standalone field-programmable gate array business – which dropped 57% over the same period last year.

The company also announced it would be suspending dividend payments from the fourth quarter of 2024.

On the subject of job losses CEO Pat Gelsinger said: “We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our head count by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year.”

He continued: “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.

Gelsinger added that the company woulid begin offering packages for “enhanced retirement” packages and voluntary redundancy.

Turning to the next quarter and the outlook for the rest of the year, chief financial officer Dave Zinsner warned of leaner times ahead.

“Weaker spending across consumer and enterprise markets, especially in China, and continued focus on AI server investments in the cloud, have reduced our TAM (total addressable market) expectations for 2024. As a result, customer inventory levels are elevated. We expect customers to reduce inventory over the second half of the year, along with the continued modest negative impact from export controls. These market dynamics should result in below seasonal revenue growth in Q3, with the client business flat-to-down and modest growth in data centre and edge markets,” he said.

“With an expectation of healthier inventory positions exiting the quarter, and the continuation of an enterprise refresh cycle, we should see revenue growth at the high end of seasonal in the fourth quarter.

“We expect gross margins to be moderately weaker sequentially, with modest revenue growth and
efficiencies offset by a continued ramp of new manufacturing nodes. While we will continue our
work to improve near-term profitability, a heavier dependence on external wafers as we ramp AI
PC products over the next several quarters will pressure gross margins.

“As a result of these factors, we expect revenue of $12.5 billion to $13.5 billion in the third quarter.”

TechCentral Reporters

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