Intel Anticipates Layoffs as Part of Plan to Save Billions in Spending

It looks like a cost reduction plan that aims to save Intel $3 billion next year in operating costs will include layoffs. The company has revealed that it seeks to slash operational expenses by up to $10 billion within three years.

Pat Gelsinger, Intel’s CEO, announced the spending cuts during the company’s third-quarter earnings call. In addition, Intel will reduce $2 billion in capital expenditures.

Intel’s Pat Gelsinger

“While we are not satisfied with our results, we remain laser-focused on controlling what we can,” Gelsinger said during the company’s earnings call.

Intel is the latest technology company responding to a significant slowdown in revenue growth in specific market sectors. Revenues of nearly $15.4 billion were slightly better than analyst expectations of slightly more than $15.3 billion. But that’s sharply lower than the roughly $19.2 billion booked during the same period last year.

For the second time, Intel lowered its forecast for the rest of the year. The company said revenues will fall to between $63 billion and $64 billion. In June, Intel cut its original $76 billion revenue forecast for the year to $65 billion-$68 billion. But Intel had issued its original forecast a week before Russia invaded Ukraine, and the economy started to slow.

Robust demand for PCs suddenly hit the skids. Earlier this month, Gartner reported PC shipments during the third quarter declined almost 20% compared to the same period last year. According to Gartner, it was the steepest such decline in 20 years.

“This quarter’s results could mark a historic slowdown for the PC market,” Gartner analyst Mikako Kitagawa said. “While supply chain disruptions have finally eased, high inventory has now become a major issue given weak PC demand in both the consumer and business markets.”

Cost Reduction Plan

Gelsinger discussed the Intel cost reduction plan during the earnings call. While he noted the current economic slowdown, the plan also includes the outgrowth of the company’s transformation effort. Specifically, Intel is ramping up its Integrated Device Manufacturing 2.0 model, which includes the building of Intel Foundry Services (IFS) business. IFS is a separate business that will provide semiconductor manufacturing for third parties.

Gelsinger noted that layoffs are necessary to “optimize headcount,” which he said will add $2 billion more in savings.

“These are difficult decisions affecting our loyal Intel family,” Gelsinger said. “But we need to balance increased investment in areas like leadership and product and capacity in Ohio and Germany with the efficiency measures elsewhere as we drive to have best-in-class structures.”