Intel has announced a major restructuring plan that will result in 18,000 job cuts. This comes after the company reported a troubling quarterly earnings report showing a $1.6 billion loss. The chipmaker plans to reduce its workforce by 15%, impacting up to 19,000 employees out of 125,000.
The goal is to cut expenditures by $10 billion. Intel’s revenues dropped by 1% and suffered a 38 cents per share loss, compared to a 35 cents per share profit from the previous year. Analysts were disappointed, as adjusted earnings predictions had expected a 10 cents per share.
The restructuring is part of Intel’s strategy to regain market share from competitors like Nvidia and AMD. These rivals have seen substantial growth, primarily attributed to the AI boom. In addition to the job cuts, Intel will reduce capital expenditures by 20% and cut costs in R&D, marketing, and non-essential tasks.
Intel restructures after $1.6B loss
The company has received $8.5 billion in grants and an $11 billion loan from the Biden administration. However, Intel’s capex will still only be 50% of that of tech giants like Microsoft and Amazon.
Intel has faced challenges as companies like Microsoft and Apple have moved away from its chips and chosen to work with Qualcomm. On a positive note, Intel’s Lunar Lake and Panther Lake projects are expected to improve its cost structure. The company’s share price fell by 25% following the earnings report due to challenging market conditions and increased AI chip manufacturing costs.
The new cost-cutting measures are projected to save $10 billion by 2025. To mitigate the situation, Intel plans to streamline its product portfolio and eliminate underperforming products. The company will also halt dividend distributions to improve liquidity and focus on domestic production capabilities and AI chip demand.
While these decisions may improve Intel’s short-term financial performance, there is still significant uncertainty regarding its long-term market position in the competitive chip industry.
