Intel slashing 12000 jobs from global workforce – Santa Cruz Sentinel

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SANTA CLARA >> Intel is slashing its global workforce by 12,000 jobs, or 11 percent of its employees, as the chip giant grapples with a dramatically shifting market for its products.

The workforce shocker is expected to save Intel $750 million this year and an estimated $1.4 billion annually by the middle of next year. Intel will take a $1.2 billion charge for the move in its next quarter.

“These are not changes I take lightly,” Intel CEO Brian Krzanich said in an email to employees. “We are saying goodbye to colleagues who have played an important role in Intel’s success.”

But that success is now challenged, as it is at many of Silicon Valley’s iconic but older tech giants, by the accelerating trend toward mobile devices and cloud computing. Intel’s cuts are the deepest since another valley legend, Hewlett-Packard, shed tens of thousands of jobs in a restructuring last year.

Analyst Betsy Van Hees with Wedbush said there probably will be more workforce trimming in the future.

“These are people that have bled true blue for Intel,” she said. “Unfortunately, given changing dynamics of Intel’s business model and market demand trends, you are going to see more cuts as the PC business continues to contract.”

This is not the first major job cut at Intel. In 2006, the company announced it was eliminating 10,500 jobs. In 2014, it said it would cut 5,000 jobs.

The new cuts, announced with first-quarter earnings, will take place by mid-2017 through a combination of voluntary buyouts, layoffs and consolidations of sites across the globe.

The chip giant is managing a decline in a core product, chips for personal computers, while attempting to pivot into the cloud. The company is going to play to its new strength, including chips for data centers and the Internet of Things.

“I am confident that we’ll emerge as a more productive company with broader reach and execution,” Krzanich said.

Intel shares were down about 2 percent to $30.93 in after-hours trading.

“They are cutting a bunch of costs,” said semiconductor analyst Stacy Rasgon of Sanford C. Bernstein. “The cost cuts will help, but I’ve never seen a company cut 11 percent of their workforce when things are going swimmingly.”

Global PC shipments dropped 9.6 percent from the first quarter of 2015, research firm Gartner reported last week. It was the sixth straight quarter of PC shipment declines, Gartner said.

“PCs are not being adopted in new households as they were in the past, especially in emerging markets,” the research firm noted. In these markets, smartphones are the priority. A long-awaited boost in sales from a migration to Windows 10 won’t be seen until toward the end of this year, Gartner said.

Intel’s Internet of Things business is growing fast but at $651 million in the quarter is still a small part of its revenue. The data center is where Intel dominates as a supplier of processors. Both are now Intel’s “primary growth engines,” Krzanich said in his letter to employees.

In its earnings report, the world’s biggest chipmaker reported quarterly revenue of $13.7 billion, up 7 percent from the same quarter last year. Earnings were 42 cents a share, up 2 percent and beating estimates of analysts polled by Thomson Reuters of 40 cents a share. Profit was $2 billion, up 3 percent from the same quarter last year.

On a quarter-to-quarter basis, however, revenue slid 8 percent, while profit was down 43 percent. Earnings per share slid 43 percent from 74 cents in the fourth quarter of 2015.

The company also announced that Chief Financial Officer Stacy Smith was moving to a new role in sales, manufacturing and operations once a replacement is found.

Intel’s client computing PC chip business was $7.5 billion, down 14 percent from last quarter but up 2 percent from the first quarter of 2015; its data center group revenue was $4 billion, down 7 percent from last quarter but up 9 percent from a year ago, while its Internet of Things Group revenue was up 4 percent from last quarter and up 22 percent over the year.

Intel’s revenue outlook for the next quarter was $13.5 billion, which fell short of analysts’ expectations of $14.16 billion.

Intel missed out on the iPhone years ago and is still trying to capture some mobile-phone sales. The good news is that it is reportedly a candidate to include some of its technology in the next iPhone. The company is “really going after” things like mobile and systems that have machine learning capabilities, as well as the coming 5G connectivity for robots, autonomous vehicles and the like, Krzanich said.

“We’ve tried to pick the segments that play to our strength,” he said.

Intel slashing 12000 jobs from global workforce – Santa Cruz Sentinel