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Intel
Proving earlier rumors to be true, chip manufacturer Intel has announced its plans to fire over 15% of its total workforce, amounting to between 15,000 and 19,000 employees, in an attempt to save $10 billion in 2025.
In a note sent by Intel CEO Pat Gelsinger to the workers, the director sang a familiar song of the firings being very painful news and the hardest thing he's ever done in his career, attributing the decision to leave thousands of people unemployed by declining profits as Intel is "yet to fully benefit from powerful trends, like AI".
To address the issues the company faces these days, the CEO aims to cut operational costs, simplify Intel's portfolio, eliminate overlapping responsibilities, halt non-essential work, and reduce Intel's capital expenditures for 2024 by over 20%, leaving the company's overall IDM 2.0 strategy, which includes priorities such as "expanding manufacturing capacity in the US and EU" and "delivering AI everywhere", unchanged.
"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," Gelsinger wrote in the note. "Our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then. There are a lot of reasons for this, but it's not a sustainable path forward."
The announcement was made following the reveal of Intel's Q2 2024 financial results, which showed a revenue of $12.8 billion, down 1% year-on-year, and a significant net income loss of $1.6 billion.
"Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones," says the CEO. "Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation."
“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," adds David Zinsner, Intel CFO. "By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet."
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