Intel to Lay Off 12,000 Employees as Focus Shifts to Cloud and IoT

Intel will lay off 12,000 workers, or 11 percent of its total workforce, as it restructures to move away from manufacturing chips for personal computers to focus on cloud hardware for data centers and the Internet of Things (IoT), the company announced along with its first quarter results on Tuesday. Intel said that growth from those two sectors combined to nearly offset its decline in PC revenues last year.

Data center and IoT business grew by a combined $2.2 billion in revenue last year, 40 percent of Intel’s total and the majority of its operating profit. Amid the talk of efficiency and fueling revenue growth, Intel says it will invest in those growth areas, as well as its memory and connectivity products, 2-and-1s, gaming, and home gateways.

Since Intel is not about to become a video games publisher, or get into smart home installation, that means memory, connectivity, and processors that will (more explicitly) be its core will be powering cloud infrastructure. Wired points out that it already does so for Amazon, Google, and Microsoft, and that ODC reports that it holds 99 percent of the cloud server chip market. The same article points out that Intel’s strategy may depend on how it meets the challenge of spiking GPU demand as deep learning is adopted by companies providing cloud services.

There were six companies offering GPUs in the cloud as of mid-2015, according to NVIDIA.

The bulk of the cuts will take place in the next 60 days, but they will continue through mid-2017, and come through site consolidations, a re-evaluation of programs, and both voluntary and involuntary departures. It hopes to save $750 million in 2016 and an annual run rate of $1.4 billion by the time the cuts are finished, while it will pay out $1.2 billion in the quarter of this year to make that happen.

“Our results over the last year demonstrate a strategy that is working and a solid foundation for growth,” said Intel CEO Brian Krzanich in an email (PDF) to Intel employees. “The opportunity now is to accelerate this momentum and build on our strengths.”

“These actions drive long-term change to further establish Intel as the leader for the smart, connected world,” he added. “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.”

Intel’s Xeon E7 v3 processors power AWS’ X1 instance, a high-performance cloud for memory-intensive workloads, which is expected to roll out this year.