Intel to Cut 10,500 Jobs to Save $6 Billion

Published: September 7, 2006

by Alex Woodie

Intel said Tuesday it plans to cut 10,500 jobs, or 10 percent of its workforce, by the middle of next year as part of a restructuring plan to trim $6 billion in costs over the next three years. The move is expected to boost Intel's profitability as it continues its battle with rival chip maker AMD to retain supremacy in the X64 and X86 market.

The Silicon Valley company, which employed 105,500 people around the world at the end of its second quarter, plans on cutting 7,500 jobs by the end of this year, and another 3,000 jobs by the middle of 2007. Intel says the move, combined with non-workforce related moves, will help the company save $1 billion this year, $2 billion next year, and $3 billion in 2008, although an expected $200 million in severance payments will offset those savings.

Most of the job cuts that will occur this year will occur in management, marketing, and information technology functions, while next year's job cuts will be more broadly based as the company seeks to "improve labor efficiency in manufacturing, improve equipment utilization, eliminate organizational redundancies, and improve product design methods and processes."

"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," said Paul Otellini, Intel president and chief executive officer, in a statement.

The layoff announcement, which had been expected for days, was actually less than the 15,000 job cuts that some had been predicting. Intel's stock, which is traded on the NASDAQ National Market, was down about $0.26, or 1.3 percent, in after market trading. The company will announced its third quarter results October 17.