Intel confirms layoffs

By Steve Malone

Posted on 7 Sep 2006 at 10:18

Chip giant Intel hopes to make savings of up to $3 billion from its restructuring programme announced late Tuesday. As widely predicted the company intends to slash 10,500 jobs in total with the aim of cutting the workforce to 95,000 by the end of the year and 92,000 by the end of next.

The massive restructuring will create a more 'agile and efficient company' according to CEO and President Paul Otellini. However, the announcement had already been anticipated by Wall Street which gave the news a cool reception. Intel shares dipped by up to 2.5 per cent in trading on Wednesday as analysts had hoped for even greater job losses leading to bigger savings.

The bulk of redundancies in 2006 will fall within management and marketing and information technology departments, the sale of businesses such as the Comms group and natural wastage will save up to $2 billion by the end of next year. In 2007, Intel hopes that jobs will be shed as the company looks for efficiency savings through improved manufacturing and equipment, less organisational duplication, and improvements in product design methods and processes. In total, Intel hopes to hit its $3 billion target by 2008.

The restructuring is in response to what has been a bad financial year for Intel and its battle with AMD. The company has been steadily losing market share to its smaller rival resulting in a sharp drop in profits. AMD has not only edged up on market share but at the end of last year actually overtook Intel in retail sales. At the other end of the scale, AMD's share of server-chip shipments rose to 22.1 per cent in the first quarter of this year, up from 16.4 per cent in the fourth quarter of 2005.

While Intel picked up the prestigious contract to supply Apple with processors for the new generation of Macs, in financial terms it will not compensate for the loss of its exclusive contract with Dell - the world's number one PC manufacturer.