In a major cost-cutting move, tech major Intel is set to clip its workforce by 15 percent, which is going to affect 15,000 employees. The majority of the job cuts will take place in 2024, the company said.
The decision was taken on August 1 after Intel published its second-quarter 2024 earnings the same day.
In a memo to staff, Intel CEO Pat Gelsinger told employees that these decisions have challenged him to his core, and is the hardest thing he has done in his career.
The restructuring will allow the chip makers from Santa Clara, California, to compete with current industry leaders AMD and Nvidia.
“We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our head count by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year,” Gelsinger’s memo, which is available on the company website, read.
“This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history. When we meet in a few hours, I’ll talk about why we’re doing this and what you can expect in the coming weeks. In advance of that, I wanted to preview some of what’s on my mind.
“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected,” he said.
As per an Associated Press report, Intel reported a loss of USD 1.6 billion in its second quarter. The revenue also dipped by 1 percent to USD 12.8 billion from USD 12.9 billion. Intel’s revenue prediction for the following quarter also falls below Wall Street’s expectations. The company’s stock also fell 19% in after-hours trading, and Intel could potentially lose an approximate $24 billion of its market value when the stock market opens Friday, the report said.
Intel said it’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures next week.
Gelsinger said the actions will make Intel a leaner, simpler and more agile company.
More tough days ahead
The Intel CEO has reminded staff that they shouldn’t be under the illusion that tough days are over, imploring them to brace for challenges.
“I have no illusions that the path in front of us will be easy. You shouldn’t either,” he said.
“This is a tough day for all of us and there will be more tough days ahead. But as difficult as all of this is, we are making the changes necessary to build on our progress and usher in a new era of growth,” Gelsinger said.
“As we take these next steps in our journey, let’s not forget that there has never been a greater need for what we do. The world will increasingly run on silicon – and the world needs a healthy and vibrant Intel,” his memo read.
“That’s why the work we are doing is so consequential. Not only are we remaking a great company, but we are also creating technology and manufacturing capabilities that will reshape the world for decades to come. And this is something we should never lose sight of as we push forward in pursuit of our goals,” he said.
