Intel Intends to Slash 10,500 Jobs
Microprocessor giant Intel announced Wednesday that it will cut 10,500 jobs or about 10 percent of its global workforce over the next 2 years as part of a wide ranging restructuring aimed at making the company more agile. But many question Intel's move because the company had been expected to cut almost twice that many jobs.
Intel President and CEO Paul Otellini called the job cuts “wrenching but necessary” in a letter to employees. He said the cuts came about after an internal review of the company’s operations was performed earlier this year.
"These actions, while difficult, are essential to Intel becoming a more agile and efficient company not just for this year or the next, but for years to come," he said.
Intel hopes to lower its workforce to about 92,000 by mid 2007 and save about 3 billion annually as a result. The cuts are needed because of intense competition from AMD which has been making steady gains against Intel for the past few years. Intel still outsells AMD by a wide margin, but AMD has forced Intel to engage in a brutal price cutting war that has lowered profit margins at both companies. AMD has also won big accounts with Intel partners, including Dell, which recently announced that it will offer AMD microprocessors in its PCs for the first time. Dell expects to ship about 20 million PCs with AMD processors next year compared to 25 to 30 million PCs with Intel based processors.
Meanwhile, analysts are wondering why Intel hasn't taken the obvious step of eliminating some money losing operations, such as its flash memory unit, which supplies chips for cell phones and other devices. That unit posted a loss of 149 million in the previous quarter. Intel says only that it's continuing to look at other cost savings.
Sony Delays PlayStation 3 Launch in Europe
In yet another troubling sign for Sony and its oft delayed PlayStation 3 PS3 game console the video game maker announced Wednesday that it was canceling plans to launch the PS3 simultaneously in its three biggest markets this November. Instead, Sony will delay the European launch of PS3 until March 2007. In addition, the company will offer only half as many PS3 units to the U.S. and Japanese markets as it previously promised.
Sony blames the delay on a manufacturing problem with the PS3's untested and expensive Blu-ray optical drive.
"This became a typical result of not knowing what to expect with a brand new component," Sony executive Ken Kutaragi, the head of the company's game division said. "This was a completely unexpected problem. There's nothing I can say except I'm sorry."
You could say Game over. Sony has suffered embarrassment after embarrassment with the PS3 and its troubled Blu-ray hardware. This latest delay and the lowered availability estimates mean that the company will lose out on crucial revenues and momentum during the holiday selling season.
Meanwhile, Sony's key competitor, Microsoft, is poised to take advantage of this situation. Last year Microsoft pulled off a simultaneous worldwide launch for the Xbox 360, though availability of the next generation console was tight until early 2007. Microsoft, as you might expect, offered words of encouragement to its stumbling rival. Sort of.
'We know how challenging it is to pull off a global launch, so it's not surprising that Sony has backed away from their previously announced launch plan due to the unproven technology they are trying to pack in to their console," Microsoft Xbox U.K. boss Neil Thompson said. "Europe remains a priority for us. That is why gamers have been able to experience Xbox 360 there from day one and why we're confident we're going to have a great Christmas regardless of what competitors are or are not in the market."
Although Microsoft still says it will reach its goal of having 10 million Xbox 360 consoles sold worldwide by the end of 2006, Sony's goals suddenly are much less lofty. The company will offer only 2 million PS3 units to the U.S. and Japanese markets this holiday season, less than half of what it previously promised. And just 400,000 consoles will be available on November 17, the day the PS3 launches in the United States. However, Sony says it can still sell 6 million PS3s by the end of March 2007. You know, if nothing else goes wrong.