Intel to slash 12,000 jobs as it shifts focus away from PCs

Intel Corp's stand at the CeBIT computer show in Germany last month. The chipmaker's job cutback - its deepest in a decade - is a radical step taken to move into new businesses and ease its dependence on the shrinking PC market.
Intel Corp's stand at the CeBIT computer show in Germany last month. The chipmaker's job cutback - its deepest in a decade - is a radical step taken to move into new businesses and ease its dependence on the shrinking PC market.PHOTO: EUROPEAN PRESSPHOTO AGENCY

World's biggest semiconductor firm eyes higher-growth areas as PC market slumps

SAN FRANCISCO • Intel Corp is eliminating 12,000 jobs - the deepest cutbacks by the chipmaker in a decade - as it takes a radical step to move into new businesses and ease its dependence on the shrinking personal computer (PC) market.

The world's biggest semiconductor company said on Tuesday that it is shifting focus to higher-growth areas, such as chips for data centre machines and Internet-connected devices, which so far are not contributing enough to make up for the decline in PCs.

Intel posted disappointing first- quarter revenue and gave a second- quarter sales forecast that fell short of analysts' estimates.

As PC shipments head for their fifth straight annual decline, Intel is finding it harder to offset that slump by leaning on booming demand for server chips and gains against its weaker rival, Advanced Micro Devices.

After bringing in new executives and shaking up his management team, chief executive Brian Krzanich's 11 per cent workforce reduction underscores his effort to decouple Intel's future from the PC market and accelerate a push into new markets, like chips for automotive, industrial and retail applications.

"It's acknowledging the reality that it's a single-digit growth world," said Mr Michael Shinnick, a fund manager at Wasatch Advisors. "The end markets aren't growing to the extent that they were."

Adding to recent shuffles among Intel's leadership, Ms Stacy Smith, who has been chief financial officer since 2007, will move to a new role as head of manufacturing and sales, the company said.

Intel shares, which have lagged behind other chip stocks this year, fell less than 1 per cent to US$31.60 on Tuesday in New York. They slipped 2.2 per cent in extended trading after a halt for the earnings and layoff announcements.

In the first quarter, net income rose 2.7 per cent to US$2.05 billion (S$2.75 billion), or 42 US cents a share, while sales climbed 7.2 per cent to US$13.7 billion, the company said. On average, analysts had projected earnings of 37 US cents and revenue of US$13.8 billion.

Second-quarter revenue will be about US$13.5 billion, Intel said, adding that gross margin, the percentage of sales left after deducting the cost of production, is forecast to be about 61 per cent in the current quarter. That measure of profitability, the only one that Intel projects, has stayed above 60 per cent annually since 2014 as high-priced, high- margin server chips become a larger portion of overall sales.

The job cuts just announced will be Intel's biggest layoffs since it reduced staffing between 2005 and 2009, when the company was responding to the global financial crisis and competition that wiped out growth.

Mr Krzanich is taking the headcount down from close to record levels after posting an average of less than 1 per cent revenue growth over the past four years. "With 107,000 employees, there's always room to tighten the belt," said analyst Craig Ellis at B Riley & Co.

Intel's workforce has been above 105,000 since 2012, when it completed a surge from an almost 10-year low of 79,800 in 2009, data compiled by Bloomberg shows.

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A version of this article appeared in the print edition of The Straits Times on April 21, 2016, with the headline 'Intel to slash 12,000 jobs as it shifts focus away from PCs'. Print Edition | Subscribe