Intel to slash up to 12,000 jobs worldwide in restructuring as PC industry swoons

Tech giant Intel's campus in Santa Clara, California. PHOTO: AFP

SAN FRANCISCO (REUTERS) - Intel Corp said on Tuesday (April19) it would cut up to 12,000 jobs globally, or 11 per cent of its workforce, as it refocuses its business towards making microchips that power data centers and Internet connected devices and away from the declining personal computer industry it helped found.

Most of Intel's factories are in the United States, although it did not identify where cuts would be focused geographically.

Tech companies including the former Hewlett Packard and Microsoft have reorganized in the face of the PC industry decline. Many new tech users around the world turn to mobile phones for their computing needs, and corporations increasingly rely on big machines rather than desktop models to run their businesses. Global personal computer shipments fell 11.5 per cent in the first quarter, tech research company IDC said on Monday.

Intel said in a statement the job cuts would be carried out by mid-2017 and the restructuring would "accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices."

Sales of products for the data center and the Internet of things accounted for 40 per cent of revenue and the majority of operating profit, it added.

Intel, the world's largest chipmaker, lowered its revenue forecast for the year. It now expects revenue to rise in mid-single digits, down from its previous forecast of mid- to high-single digits.

Intel's shares were down 2.2 per cent at US$30.90 in extended trading on Tuesday.

It said it would record a pretax restructuring charge of US$1.2 billion in the second quarter and expected annual savings of US$1.4 billion per year starting mid-2017.

The company also said chief financial officer Stacy Smith will move to a new role leading sales, manufacturing and operations. Intel said it would begin a formal search process for a new CFO.

Mr Smith said that Intel now expects the PC market to decline by a percentage in the high single digits in 2016 versus a prior forecast of a mid single-digit decline. Declines in China and other emerging markets are also leading to greater than anticipated reductions in worldwide PC supply chain inventory, Intel Chief Executive Brian Krzanich said on a conference call.

"PC demand, at least in the eyes of Intel, is expected to be weaker than the industry originally anticipated," said Angelo Zino, an equity analyst at S&P Capital Global Market Intelligence.

He added that although the industry has already seen some of the weakness experienced by Intel, the company's comments dashed any hope of recovery.

Intel has been focusing on its higher-margin data centre business as it looks to reduce its dependence on the slowing PC market. It has also made inroads into the mobile devices market, although competitors Qualcomm and Samsung Electronics dominate there.

Raymond James analyst Hans Mosesmann, who rates Intel "under perform" said the problems leading to the job cuts were likely more about Intel than the broader tech industry. "The bigger issue is the restructuring and will it be enough for the company to properly adapt to a changing environment where cloud and IoT competitive dynamics are quite different," he added.

On a per share basis, the company earned 42 cents per share, in the first quarter, up from 41 cents a year earlier.

Net revenue rose to US$13.70 billion from US$12.78 billion.

Up to Tuesday's close, Intel's shares had fallen 8.4 per cent this year, compared with a slight gain in the broader semiconductor index.

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