Intel announces restructuring, plans to cut 10,500 jobs by mid-2007

Intel today announced plans for restructuring following an analysis of the company’s structure and efficiency. As a result of the restructuring, the company expects to generate savings in costs and operating expenses of approximately $2 billion in 2007. In 2008 the company expects savings from this restructuring to grow to approximately $3 billion annually.

The savings are a combination of non-workforce related steps and a significant reduction in Intel’s workforce. The company’s employee population will decline to approximately 95,000 by the end of this year, resulting from workforce reductions, attrition and previously announced actions. The workforce will decline to approximately 92,000 by the middle of 2007 – 10,500 fewer than the company’s employee population at the end of the second quarter of 2006. In addition to the savings from the workforce reduction, the company expects savings in merchandising expenses, capital and materials.

“These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come,” said Paul Otellini, Intel president and chief executive officer, in the press release.

According to Intel, most job reductions this year will occur in management, marketing and information technology functions, reductions related to the previously announced sale of businesses, and attrition. In 2007, the reductions will be more broadly based as Intel improves labor efficiency in manufacturing, improves equipment utilization, eliminates organizational redundancies, and improves product design methods and processes.

In 2008, the company expects the cost and operating expense savings from this restructuring to grow to approximately $3 billion as it achieves the full-year run rate on the projects implemented in 2007. In addition, Intel expects to achieve a capital expenditure avoidance of $1 billion by better utilizing manufacturing equipment and space. The company expects that approximately 25 percent of the project’s savings in 2007 will reduce cost of sales, and the rest will reduce operating expenses.

The company expects severance costs to total approximately $200 million, offsetting some of the expected savings from the project’s implementation.

Intel is currently in its quiet period, so Intel says an update to its business outlook will not be made at this time. Further information concerning savings and costs related to the restructuring project will be provided in Intel’s quarterly earnings releases and related business outlook estimates. The earnings release for the third quarter of this year is scheduled for publication Oct. 17.

Source: http://www.intel.com/pressroom/archive/releases/20060905corp.htm

[Thanks to MacDailyNews Reader “Rainy Day” for the heads up.]

22 Comments

  1. i would have thought this to do with dell (largest intel customer) moving towards amd, though i could be wrong, hopefully mac sales will help compensate for this ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  2. Intel has been in the crapper because they’ve been work’n feverishly to get the new higher performance chips out, now it’s just a matter of sell’n the new wares (and developing the next generation)

  3. Intel has always been slow

    Just look at the real performance benchmarks of the Mac Pro Quad against the PPC Quad, a mere 7% performance improvement?

    How many years has the G5 processors been out now?

    Why did Apple switch to Intel? It’s because Hollywood and Intel have spooned up.

    Content is king and Hollywood wants Intels DRM scheme.

    Steve Jobs is about to unload Apple to Google or Intel.

    AMD wasn’t a option.

    Steve Jobs is like a property investor, buy it cheap and dumpy, fix it up and sell it for a profit.

    He’s done it two companies already:

    Bye bye, Next

    Bye bye, Pixar

    Soon bye, bye, Apple

    Hello retirement.

    I for one welcome our new Google overlords

  4. Bahh Humbug,
    I know SJ is out to make money but he has more than a monetary involvement in Apple. He wants to change the world. Apple is not selling to anyone. And his health is fine. Only intel has the intellectual capital to keep pace with Apple’s momentum.

  5. Bahh Humbug has gotten through the RDF. He’s more right than wrong.

    poo, on the other hand, is looking for silver linings where they don’t exist.

    Intel is in very real, very deep trouble my friends. They can’t ramp up Core2 production very quickly, because only a few of their Fabs are cabable of making it. All the rest are dedicated to old Netburst stuff, mainly because they don’t have the time or the money to reconfigure them fast enough. Netburst isn’t selling (‘unsafe at any speed’) and yet it’s 80% of what they make. What company can survive when 80% of it’s operations are devoted to making a product they can’t sell? Answer: NONE.

    I tried telling you guys all those many months ago when The Switch was announced that it was a mistake. Intel is too big and too slow. The culture is shot through with corruption and ass kissing. Otellini, weener that he is, probably didn’t even know that this perfect storm was coming. But any clear-eyed outside observer should have – and many did. And now, independent benches are showing Woodcrest to be incapable of handling more than 2 gigs of memory, the whole Core2 architecture isn’t anywhere near as ‘fuel efficient’ as it was promised, and the performance advantage over the G5 is negligable-to-non-existant. And whether IBM would have kept up development of it had Apple stuck around is irrelevant, since AMD’s CPUs are already matching Intel’s best, and they have a die shrink coming up AND a new chip architecture to boot (K8L).

    How Jobs wound up thinking this Intel-deal was a good move would be beyond comprehension … IF you didn’t recognize and accept the Intel/Hollywood studio connection. Jobs thought he saw a shortcut to riches, by accepting their demand that he incorporate Intel’s DRM technology into every Mac Apple makes, and that meant dumping PPC, and shunning AMD. Performance had nothing to do with it, better CPU supply or prices had nothing to do with it, and certainly Intel’s prowess as a company had absolutely nothing to do with it. the motivator was getting on Hollywood’s good side, and for that we get $10-15 dollar movie downloads (if reports are to be believed). Yeah! Thanks Steve-o … for nothing!

    The only good news is that with AMD still thriving, and Universal Binaries making even a switch back to PPC possible, even a total crash of Intel won’t kill Apple. But I’d trade that advantage for a Apple investing half the money they spent on the switch on contracting either PASemiconductor or IBM to make the next-gen PPC CPU.

    Anybody got a time machine?
    ” width=”19″ height=”19″ alt=”cool grin” style=”border:0;” />

    MDN magic word … I kid you not … “expected”
    As in, “These major problems Intel is having should have been …”

  6. “… independent benches are showing Woodcrest to be incapable of handling more than 2 gigs of memory …” should read:

    “… independent benches are showing Woodcrest to be incapable of handling, very well, more than 2 gigs of memory …”

    The problem is Intel’s implementation of 64bit technology on x86. I have no idea why they’re having this issue, but it’s becoming apparent that they didn’t do as good a job with it as AMD did, since Core2 performance drops off CONSIDERABLY when 64bit levels of memory are involved. At 32bit memory levels, it does ok – neck and neck with AMD’s latest – but above 2 gigs, things get messy.

  7. Odyssey67:

    Thank you very much for the doom and gloom forecast. Since you have aptly demonstrated your brilliant capacity for predicting this “perfect storm”, what is your next prediction? In particular, what are the 5 year prospects for Intel, AMD, IBM, and Freescale? A forecast isn’t complete unless all 4 parties are included in the analysis.

    Just to make things even more interesting what would you have done that Apple didn’t do? In particular, which chip maker would you have selected for the next generation of Macs and why?

    “Anybody got a time machine?” Who needs a time machine when we have your crystal ball, eh, Odyssey67?

  8. Odyssey… you’re trying pretty hard to ignore the multitude of benchmarks that show the Core2Duo chips spanking AMD’s current offerings in every manner of measurement- price, performance, and energy efficiency. Of course it will take some time to change their manufacturing over and retool their factories… I don’t know who in their right mind wouldn’t expect this, or what magic company you’re thinking of that wouldn’t have to do this… although other companies with less production capacity might have an easier time of it because they have less to change over. Netburst are still selling, I know some friends that just bought pentium 4’s.

    Bahh Humbug: Depending on which benchmarks you look at, the 2.66 Ghz Mac Pro gets more than 7% on many tests, and the 3Ghz Mac Pro is considerably faster. So unless you’re comparing the current mid-range to the previous high-end, I don’t know where your “only 7% faster” is coming from. Or do you really think that the G5 would have hit 3Ghz by now?

    MDN MW: Building, as in “By partnering with Intel, Apple is building a solid foundation for the future instead of just looking in the short-term like some people seem to”

  9. Hey, look who crawled out from under his rock! It’s Odyssey67! Where have you been all this time? Hiding from the successful Intel transition that kinda made you look like an idiot, what with all your grandiose predictions of dire disaster?

    And hey, a movie service is expected on Tuesday! Let’s see how well your “OMG DRM DOOMZOR!” prediction holds out. Remember, Odyssey says that Apple only went with Intel for their DRM for the movie service, so this service will only work with the newest Macs, not PPC Macs or PCs. Right?

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.