Intel Corp has said it would cut 1,000 jobs, or about 1% of its global workforce, from all geographic regions and business units, ranging from frontline to senior management.
The move is part of the chipmaker’s broad operational overhaul, announced in April, to become a smaller, more agile company as it faces an overall industry slowdown and fierce competition from chief rival Advanced Micro Devices Inc.
Chief executive Paul Otellini said at the time that a thorough internal operation review, in which no stone will be left unturned, would be completed by the end of July, but that remedial action would begin sooner.
The management job cuts are among the first of those actions, following the company’s recent sale of its XScale cell phone business to Marvell Technology, which reduced its head count by 1,400.
Sunnyvale, California-based Intel employs about 100,000 workers worldwide.
Intel spokesperson Chuck Mulloy said Intel expects the action to be completed by the end of July.
This specific action is designed to both reduce costs and to improve decision-making and communications across the company, Mulloy said.
Intel’s analysis of its management structure and its staffing levels during the past five years showed its management had grown faster than its employee population, Mulloy said.
The analysis that we did indicated to us that we had too many layers of management to be effective, between the frontline or the first line supervisors all the way to senior managers, he said.
The cuts will be a combination of eliminating positions and expanding the control of others, he said.
Any cost savings as a result of the cuts would be embedded in Intel’s third quarter and full year projections, Mulloy said. He could not say whether those savings would be material or not.
When Intel chief executive Paul Otellini first announced the restructuring, a few months ago, he said there would likely be a long tail association with our actions here that will go out into 2007.
Mulloy said it was not yet clear whether there would be other management job cuts at some future point as part of the overhaul.
The efficiency analysis project is continuing and we would expect to provide further updates later in the third quarter and after that, he said.
While a brief update on the restructuring decision may be provided during the upcoming earnings call, Mulloy said there would be no update on the restructuring review process at that time.
The company has not hinted on just how many Intel workers may lose their jobs during the next year or so. That’s hasn’t stopped punters from guessing.
Wall Street analyst Doug Freedman, with American Technology Research Inc, said in a report to investors that the company might cut as many as 15,000 jobs.
We have learned that Intel may be calling a press conference later today to announce the results of the company’s ‘top to bottom’ review, wrote Freedman. We believe investors are looking for workforce reductions in the range of 10,000 to 15,000, as the company streamlines R&D with a PC-centric focus.
While there was no press conference on Intel’s managerial cuts, it is worth noting that Intel has already offloaded 2,400 workers since its April announcement before the company has even finalized its internal review.
Freedman said Wall Street welcomes the cuts. We do favor the work force reductions as the major PC segments begin to reuse technology, he said in his report.
What’s more, Freedman was encouraged that Intel appeared to be moving toward a product line-up built on technology first introduced with the launch of its Pentium M mobile processor.
Some of the freed up R&D resources will be reapplied toward the company’s new goal of fast technology cycles, moving from four-year cycles to two-year cycles, he wrote. Ultimately we believe we will end up seeing three-year cycles that are more in-line with customer and infrastructure capabilities and demands.
Intel shares slipped nearly 1% to close at $17.72 on the Nasdaq following the news, and fell a further two cents in after-hours trading.