Wednesday, September 06, 2006

Intel fails to satisfy markets by cutting 10,500 workers

Intel fails to satisfy markets by cutting 10,500 workers
By Chris Nuttall in San Francisco
Copyright The Financial Times Limited 2006
Published: September 6 2006 03:00 | Last updated: September 6 2006 03:00

Intel, the world's biggest chipmaker, said yesterday it was cutting its workforce by 10 per cent to 92,000 - the result of a 90-day review of its structure and efficiency as revenues slumped this year.

The move failed to satisfy Wall Street, which had been expecting bigger job cuts of 10,000 to 20,000 and the sale of loss-making businesses. After closing 0.5 per cent up in New York before the announcement, Intel shares fell 1.25 per cent in after-hours trading to $19.74.

The Silicon Valley company said its global workforce of 102,500, as of June 30, would be cut by 10,500 to 92,000 by the middle of 2007.

But only 5,500 of the positions constituted new reductions. Intel had announced a cull of 1,000 managers in July and 4,000 jobs will disappear by the end of this year as the result of natural attrition and the previously announced sale of its mobile-phone chip business to Marvell Technology.

A further 2,500 jobs will go in 2006 as management and marketing units are reorganised and cuts are made to teams running Intel's IT infrastructure.

The remaining 3,000 jobs will go in the first half of 2007 as a result of improving labour efficiencies in manufacturing and redundancies through reorganisation.

Chuck Mulloy, Intel spokesman, said specific posts had not yet been identified. He said the company would not comment on speculation that businesses could be sold, but added that the job cuts represented the conclusion of the efficiency study.

Intel expects severance costs of about $200m (£105m) but predicts the restructuring will generate savings of $2bn in 2007 and $3bn in 2008. In April, it set a target of $1bn in savings for this year.

Merrill Lynch analysts, in a note published before the announcement, had predicted the cost-cutting efforts would focus on peripheral businesses such as its flash memory division and other segments that had reported total operating losses of $800m in the second quarter, compared with $1.9bn in profits for its core microprocessor divisions.

But Intel has either not found buyers or still sees a future inside the company for its non-core businesses.

Intel's sales have slumped through loss of market share to rival Advanced Micro Devices, which had grabbed a technology lead, coupled with softer demand for PCs.


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