Intel Reports Record Full-Year Revenue of $55.9 Billion, Generates Net Income of $11.7 Billion, Up 22 Percent Year-over-Year
Intel is preparing a significant round of job cuts across business units this spring, according to multiple sources inside the company familiar with its plans.
The cutbacks will reduce employment in some parts of the business by double-digit percentages, according to Intel insiders, amounting to thousands of job cuts across the company by the end of the year. The planned downsizing could begin soon after Intel reports its first-quarter financial results Tuesday, though sources say timing and specifics remain fluid.
The plans have not been officially announced inside the company and have not been publicly disclosed. Intel did not respond to repeated requests for comment this week.
Intel had 107,000 employees worldwide at the end of December. Its Oregon headcount is at a record high, 19,500, up 5 percent since last summer as the company ramps up work inside a new, multibillion-dollar Hillsboro research factory called D1X.
Intel has a singular role in Oregon’s economy as the state’s largest private employer, paying some of Oregon’s best wages. Companies that supply Intel and build and maintain its factories contribute thousands of additional jobs.
Sources indicate this year’s cutbacks will be considerably larger than layoffs last year, when Intel eliminated more than 1,100 U.S. jobs after anticipated sales growth failed to materialize.
Intel is still a hugely profitable company, with gross profit margins north of 60 percent, and it has forecast sales growth of more than 5 percent his year. However, it’s repositioning the business for long-term changes in the marketplace.
Intel is fighting a prolonged decline in the PC market, which accounts for more than 60 percent of its revenue, as consumers and businesses shift to mobile and delay upgrading older computers. The company appears to be reshaping its leadership and its workforce as it tries to develop new markets beyond the PC.
The pending cuts are part of a rapidly unfolding reorganization at Intel, accompanied by a major overhaul within Intel’s executive ranks. Former president Renée James left last year, replaced by Venkata “Murthy” Renduchintala, who was hired last year from rival chipmaker Qualcomm. And Intel announced last week that two top vice presidents who reported to Renduchintala are leaving.
Sources inside the company say the roles of other top executives are also in flux.
Last week, Renduchintala sent senior management a memo outlining a new plan for developing key products to address a “competitiveness gap” in Intel’s technology.
“After seeing the upheaval in senior staff, it would not surprise me if structural changes are finally afoot,” said Jim McGregor, who follows the chip industry for Tirias Research in Arizona. McGregor said he hasn’t heard specific job cut plans himself, but said it’s clear Intel is preparing for a profound shift.
Intel is facing other issues beyond lagging PC sales, highlighted by the increasing complexity of of the technology inside computer chips. As feature sizes shrink and chip designs grow more sophisticated, Intel has found it more expensive and time consuming to engineer and manufacture each new generation of microprocessor technology.
As a result, Intel is slowing the cadence at which it rolls out new generations of chip technology. That erodes the competitive advantage Intel has long enjoyed over rival chipmakers and puts new cost pressures on the company.
Additionally, sources inside the company say Intel may be looking to consolidate some operations and close some smaller outposts after a series of acquisitions, notably last year’s $16.7 billion takeover of programmable chipmaker Altera.
Job cuts could be a way to address those pressures and protect Intel’s profit margins as the company retools for new generations of technology, McGregor said. He noted that Qualcomm cut 15 percent of its work force last year as it restructured.
Intel is enjoying robust demand for top-end, highly profitable microprocessors for data centers. But McGregor said top leadership is undoubtedly thinking about what Intel should look like five years or more into the future.
“The company is finally realizing things have changed for the long term,” he said, “and they’ve shifted the focus of the company.”
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