Santa Clara, California-based Intel Corp. is planning a major downsizing in headcount numbering in thousands. The company hopes to cuts costs and cope with the sputtering demand for personal computers.
The job cuts will be announced later this month when the company releases its third-quarter earnings. The company’s headcount was 113,700 as of July. According to some people, the sales, marketing, and some other divisions may see a cut of as much as 20%.
The company is struggling to win back the market share it had lost to its rivals Advanced Micro Devices Inc., apart from facing a significant decline in demand for PC processors. In July, Intel warned that its 2022 sales would be lower by $11 billion than estimates. Analysts are expecting a revenue drop of 15% in the third quarter. The once-envied profit margins of the company have also shrunk.
In its second-quarter earnings, Intel said they are looking at reducing core expenses in 2022 and taking additional steps in the year’s second half to improve profits.
Intel’s last major layoff was in 2016, when it cut 12,000 jobs accounting for 11% of the total workforce. The company also closed several divisions that included drone and cellular modem units. They also froze their hiring this year in line with the technology industry because of poor market conditions and recession fears.
According to Mandeep Singh, an analyst at Bloomberg intelligence, the latest layoffs will result in the company’s fixed cost reducing by 10% to 15%. He estimates a cost reduction of at least $25 billion to $30 billion.
Pat Gelsinger, who took over last year as the CEO, is working towards restoring Intel’s reputation in Silicon Valley. However, Intel had already lost its long-held edge in technology even before the market slump.
According to IDC, the sales of OC fell 15% in quarter three this year compared to last year. HP, DELL, and Lenovo use intel chips in desktops and laptops, and all have suffered massive declines.
According to Mandeep Singh, Intel will need to offset poor cash flows due to weak demand and stagnant PC prices with a dividend pay-out cut. Intel is planning an IPO of its Mobileye self-driving tech business which is expected to ease its concerns.
This year the company lobbied hard for a stimulus package of $52 billion, promising to expand its manufacturing capacities in the US. Making cutbacks at this juncture can be awkward for the company, and it plans to build the biggest chip-making hub in Ohio.
Investor Pressure
The company’s share prices have declined by more than 50% this year, with a more the 20% plunge in September alone. The investors are now pressurizing the company to shore up its profits. Shares traded at $24.80 in New York Wednesday, down 1 %.
Intel is launching new graphic semiconductors and PC processors to regain its place in the industry. Its strategy is to sell more chips to data center markets where rivals such as Nvidia Corp. and AMD have already made inroads.
