Intel will cut about 15 000 jobs – 15% of the workforce – as part of its plan to reduce costs by about $10-billion.
CEO Pat Gelsinger made the announcement after the company’s earnings call yesterday, adding that the extensive cost-cutting will take place in the current financial year.
“This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history,” he wrote in a note to employees.
Explaining the rationale for the decision, Gelsinger says Intel needs to align its cost structure with its new operating model, and fundamentally change the way it operate..
“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” he says. “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.”
He says that when Intel assessed itself against benchmarks for high-performing foundries, fabless product companies and corporate functions it became clear that its cost structure is not competitive.
“Beyond our costs, we need to change the way we operate,” he adds. “There’s too much complexity, so we need to both automate and simplify processes. It takes too long for decisions to be made, so we need to eliminate bureaucracy. And there’s too much inefficiency in the system, so we need to expedite workflows.”
During the restructuring, Intel will focus on several areas:
- Reducing operational costs;
- Simplifying its portfolio;
- Eliminating complexity;
- Reducing capital and other costs;
- Suspending its dividend; and
- Maintaining growth investments.
The first step in the restructuring will be to announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures. This will happen as soon as next week.