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.