Intel will slash 15,000 jobs. The semiconductor major will also cut capital expenditure. Intel will be reduce its cost for sales as it is not expecting revival in business in the next two years.
First, Intel plans to deliver $10 billion in cost savings in 2025, and this includes reducing head count by roughly 15,000 roles, or 15 percent of workforce. The majority of these actions will be completed by the end of this year.
Intel CEO Pat Gelsinger in a letter to employees said: “Intel’s annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10 percent larger now than it was then. There are a lot of reasons for this, but it’s not a sustainable path forward.”
“Beyond our costs, we need to change the way we operate – something many of you shared as part of our Employee Experience Survey. There’s too much complexity, so we need to both automate and simplify processes,” Pat Gelsinger said.
The plan to cut $10 billion follows poor financial performance in the second quarter of 2024. Intel reported 1 percent drop in sales to $12.8 billion. Intel is forecasting third-quarter 2024 revenue of $12.5 billion to $13.5 billion.
“Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity,” said David Zinsner, Intel CFO.
Second, Intel will streamline its operations. It will cut spending on R&D and marketing, general and administrative (MG&A) to approximately $20 billion in 2024 and $17.5 billion in 2025, with further reductions expected in 2026.
Third, Intel is shifting its focus toward capital efficiency and investment levels aligned to market requirements. This will reduce gross capital expenditures in 2024 by more than 20 percent from prior projections, bringing gross capital expenditures in 2024 to between $25 billion and $27 billion.
Intel expects capital spending in 2024 of between $11 billion and $13 billion. In 2025, the company is targeting gross capital expenditures between $20 billion and $23 billion and net capital spending between $12 billion and $14 billion.
Fourth, Intel will be reducing cost of sales. The company expects to generate $1 billion in savings in non-variable cost of sales in 2025. Product mix will continue to be a headwind next year, contributing to modest improvements to 2025’s gross margin.
Intel has reported sales revenue of $12.8 billion (down 1 percent). Intel clocked sales revenue of $7.4 billion (up 9 percent) from Client Computing Group (CCG), $3 billion (down 3 percent) from Data Center and AI (DCAI), $1.3 billion (down 1 percent) from Network and Edge (NEX), $4.3 billion (up 4 percent) from Intel Foundry and other revenue of $968 billion (down 32 percent).
Baburajan Kizhakedath
