Intel Announces 11 Percent Workforce Reduction, Laying Off 12,000 In Restructuring Effort

Hot on the heels of its latest financial reports, which showed the company beating estimates for both earnings and revenue, but offering weaker than expected guidance for Q2, Intel has announced a significant workforce reduction that will result in approximately 12,000 job cuts over the next year.

The restructuring initiative was outlined in an e-mail from Intel CEO Brian Krzanich. In the email, Krzanich states, “Our results over the last year demonstrate a strategy that is working and a solid foundation for growth. The opportunity now is to accelerate this momentum and build on our strengths.” Krzanich is speaking of Intel’s plan to shift focus from standalone, client PCs, to growth markets like the Cloud and the Internet of Things (IoT). Save for a few areas like 2-in-1 devices and gaming, PC sales have been sliding for the last few years, which has affected Intel’s ability to sell client processors. The company has strong roots in servers, however, and is making a sustained push into the ultra-mobile space, despite tough opposition from competitors that leverage ARM-based processor technology.

Krzanich continues with, “These actions drive long-term change to further establish Intel as the leader for the smart, connected world. I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.” Although cutting its workforce, Intel plans to increase investments in products and technologies that that could potentially fuel revenue growth, and pull more profit into its mobile and PC businesses moving forward. Intel plans to increase investments in its data center, IoT, memory and connectivity businesses, in addition to the growing client segments, which include the aforementioned 2-in-1 devices and gaming PC, along with home gateways.

The restructuring will result in an approximate 11% reduction in Intel’s workforce by mid-2017, and will include site consolidations worldwide and a combination of voluntary and involuntary departures. According to a press release, the majority of cuts will be communicated to affected employees over the course of the next 60 days, though some actions won’t take place until 2017.

Intel expects the restructuring to deliver $750 million in savings this year and annual run-rate savings of $1.4 billion by mid-2017. The restructuring, however, will also result in an approximate $1.2 billion charge in the second quarter.