The world's biggest chipmaker, Intel, has announced that it is cutting its global workforce by some 5 percent this year, or about 5,350 of its global workforce of 107,000 employees. The cutback was decided following Intel’s projection of virtually no revenue growth this year, and will be accompanied by the company’s re-orientation toward mobile and other markets.
A company spokesperson told news media that the move is “part of aligning our human resources to meet business needs.” Intel has not yet said where the cuts will be made, or how they might affect departments or product lines.
On Thursday, CFO Stacy Smith told analysts that Intel would be increasing its investments in some areas that, unlike PCs, hold more promise going forward, such as chips for mobile devices.
PCs Decline Only 3 Percent
Earlier this week, the company delivered a fourth quarter earnings report that received a mixed reaction.
The firm's fourth quarter earnings of $2.6 billion on revenue of $13.8 billion were actually up 3 percent from a year ago, but Wall Street analysts were expecting slightly higher earnings. Total earnings for 2013 were $9.6 billion on $52.7 billion in revenue, a drop of 1 percent from 2012, and the company said it expected essentially no increase in revenue in 2014.
PC sales in the fourth quarter are actually higher than a year ago at the same time. According to industry research firm IDC, PC shipments dropped 10 percent last year, however, Intel said its PC business declined only 4 percent. But, while Intel’s chip sales for PCs are beginning to even out, server chip sales have been disappointing.
‘Overestimated Rate of Recovery’
CEO Brian Krzanich told investors and analysts that Intel had “overestimated the rate of recovery among corporate buyers,” and added that 2014 was now looking like a slower recovery for computing purchases among businesses. The company’s data center-related business grew only about 8 percent in 2013, while analysts had been expecting double-digit growth.
Krzanich has pointed in particular toward the potential of Intel-based tablets, one of several mobile markets that the company has been emphasizing, along with the emerging market of wearables. He has declared a goal of selling 40 million tablets this year based on Intel chips, a substantial increase over the 10 million Intel-based tablets sold last year. Coming up this year are Android tablets using the new Intel Bay Trail chips, which are expected to hit the market in the second quarter.
In addition to a weaker-than-expected business market, Intel has also been facing stiff competition in mobile devices from ARM-licensed chips. At the recent Consumer Electronics Show in Las Vegas, Intel received some press for demonstrating wearable devices that were, in fact, using chips based on ARM designs. The devices were shown during a presentation by the CEO, as he was discussing the evolution of computing from “screens and devices to a world of immersive experiences.” Intel later acknowledged that some of the demo devices had “third-party parts.”