Intel Announces Major Workforce Restructuring: 11% of Workforce to Be Cut Over Next Year
by Ryan Smith on April 19, 2016 5:50 PM EST- Posted in
- CPUs
- Intel
- Financial Results
Ahead of today’s Q1 2016 earnings release and call, Intel has announced that they are going to be cutting a significant number of jobs over the next year. The job cuts come as part of Intel’s larger and ongoing restructuring efforts, as the company grapples with an overall soft PC market and continued struggle to carve out a larger piece of the mobile market. Ultimately Intel’s looking to invest in what they consider to be high-growth areas, which means laying off employees in stagnant business units while making other investments in those areas that are seeing continued growth.
The job cuts themselves are expected to involve up to 12,000 employees, or about 11% of the company’s workforce. Intel will be eliminating positions through a combination of both voluntary and involuntary layoffs, and in the process will be consolidating the remaining workforce and their respective sites. Intel expects the bulk of the layoffs to occur within the next 60 days, with the entire process stretching into mid-2017.
The company’s pre-earnings announcement does not state where these layoffs will come from, and we’re expecting at least some additional detail to come out of the company’s earnings call which is still on-going. However the company is reiterating what markets and businesses they see as growth opportunities and will be investing into for the future, which offers some basic guidance on what the company sees as their most important businesses. Intel’s Data Center and Internet of Things businesses are specifically being cited as their stand-out businesses, which combined with memory and FPGAs provided 40% of the company’s revenue and a majority of their operating profit. Meanwhile in the consumer/client market Intel has seen good returns on 2-in-1s, gaming and home gateways. Conversely, the overall (client) PC market is still in decline, and I expect that a number of the cuts will be centered on that.
Finally, Intel has also detailed the costs of their restructuring. The company will incur a one-time charge of $1.2 billion in Q2, with this presumably being a significant number of severance payments. In turn, the company expects to save $750 million this year, with an annual run rate savings of $1.4 billion per year after the last of the layoffs are completed in mid-2017.
We’ll update this article later today with more information once it comes out of Intel’s earnings call. Ultimately the soft PC market has been a continuing trend for Intel over the past few years, so that we’re seeing Intel react to it now is not unexpected. However it will be important to see just how the layoffs are organized – for example, if Intel makes much in the way of cuts in the fab business – as Intel is a large company. What this means for future client PC investments, mobile, could prove to be significant.
Update: Intel's earnings call has shed a bit more light on the restructuring, but Intel is not spelling out exactly where the bulk of the cuts are coming from at this time.
Overall Intel did reiterate that although the client business has been weak, the company's restructuring plans will be touching more than the client business. The impact to the client business then is that it is being refocused via the restructuring, hence the earlier comments on what Intel sees as the client growth markets. Undoubtedly aspects of the client business are in the crosshairs given the continued slowness in the market, but Intel isn't saying too much more than that.
The company has also made it clear that they're not backing off on fab/manufacturing investments in the near future. Capital expenditures on 10nm and 3D NAND continue untouched even with the restructuring, and overall Intel's technology cadence plans have not changed. Farther ahead, the company has indicated that they are being mindful of their capable competition, and that they need to stay ahead of them, including getting back to a two-year cycle if at all possible.
Finally, Intel has offered a bit more information on the timeline for the restructuring itself. While the majority of the notices to employees will go out in 60 days, the projection is that only about half of the layoffs will be completed by the end of this year, which implies the rest will happen in H1 2017. Part of this comes down to the fact that while Intel has a target number for employment, they have not decided whether they will end any product lines entirely. Intel is in the process of undergoing a complete review of the business to identify any products the company may want to cease, and Brian Krzanich has said that when the review is done there's likely to be a few products that get flagged.
Source: Intel
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knightspawn1138 - Wednesday, April 20, 2016 - link
If an integrated video chipset on the CPU were such a great advantage, then AMD would be in the majority of Windows tablets and all-in-ones. But they're not, mostly because Intel chips can get the job done with a CPU/GPU that generates about 5W of heat. If AMD could put a chip out with decent performance at sub-10W, and match all of the features of Intel's chipsets (Thunderbolt, DDR4, huge number of PCIe lanes, etc.), then they would be competitive again. AMD needs a miracle, a successful die-shrink, and a huge injection of cash in order to catch a glimpse of a chance of getting back on even footing with Intel. Right now, AMD has to be sweating bullets that ARM may move into the PC desktop space and ruin them at the low-end.AMD has Intel's rocket-boots in it's face in the high-end market, and ARM's fist ready to be planted firmly where the sun don't shine in the low-end of the market. If it wasn't for GPU's and game consoles, AMD wouldn't have anything to protect it. Ever seen a smartphone or tablet running an AMD chip? Me either.
Dug - Thursday, April 21, 2016 - link
I agree. I'm not sure of anyone that won't spend a few more bucks for efficiency, battery life, low heat, etc. Not sure how AMD is relevant anymore except in video cards.We certainly don't go out of our way to save $200 on a $7500 server to go with AMD with lower performance, less driver support, fewer features, and higher heat output.
willis936 - Wednesday, April 20, 2016 - link
Guess I won't be applying to Intel after I finish this masters.JoeyJoJo123 - Wednesday, April 20, 2016 - link
I'd keep it in mind, but yeah, no matter how good you are, chances are it's going to be incredibly difficult to get your foot in the door (particularly since they're downsizing) unless you have a number of internal connections in the company (and if that's the case, then I and many people hate you for approaching the job hiring process as a basis of who you know rather than what you know).In any case, I feel Intel and x86 are dying giants right now. The performance gains to be mustered out of x86 processors with additional node shrinks and optimizations looks bleak, and chances are Intel will be behind once a new company with a new direction on future computing steps into the ring with advanced stuff like quantum computing, while Intel's a bit too busy and invested into x86 capital to really make strides into a different kind of computing paradigm.
LorinT - Wednesday, April 20, 2016 - link
This is no fault of Intel -- it's the result of fumbles by the bigger fish just up the food chain; the folks in Redmond. Four tiresome years of tiles, with the hope that the world would somehow think Microsoft's tablet was useful. I find both releases downright confusing. Total wreck of an operating system. The latest atrocity was to limit Windows 7 to run only on older hardware. Of course Intel can't sell new Skylake chips if Microsoft's only useful OS is cripped to only run on Broadwell and older.Let's hope that Apple's new product line gains some popularity, enough to let Intel recover a little from Ballmer's completely botched ideas.
bug77 - Wednesday, April 20, 2016 - link
Apple has less than 10% market share worldwide, they can't help Intel.But see my post above: all Intel has to do is come up with more powerful CPUs. Then programmers could build smarter software (or Microsoft could built a smarter Windows) and everyone would be interested in the PC again. Current software runs just fine on an i7-2600k, so why would people look into newer hardware?
Reflex - Wednesday, April 20, 2016 - link
Apple isn't even at 10%, its about half that in the real world. Windows 10 is wildly popular. But there really has been no need for hardware upgrades in ten years now. You state that current software runs just fine on an i7-2600k, I'll go further: My 2007 era Core2 Duo laptop from Dell runs Win10 just fine and all basic software. Even low end games. The only upgrade it needed was a SSD.This is a major problem for Intel. Its becoming a problem for Qualcomm as well. The phone upgrade treadmill has slowed tremendously and Qualcomm's latest results reflect that fact. We fist reached a point of 'good enough' with the hardware. After that it was inevitable that we'd reach a point of saturation since the hardware itself lasts a long time. The only real growth remaining is in one of two areas -
1) Expansion into new markets (China, India, Africa, etc)
2) Creation of new device categories that consume CPU's. Think Hololens.
Murloc - Wednesday, April 20, 2016 - link
your personal lack of adaptability to the changes is informing your opinion.In reality consumers don't care at all about that W7 limitation and have upgraded to W10 already, and most I see aren't complaining about it.
Corporate is different with the support issues, but the fact is that my i5 750 works just fine and the only bottleneck I have is the GPU, so I'm sure office computers have even less need to update.
svan1971 - Tuesday, May 3, 2016 - link
Fire the American workers to make room for those H-1B hires...