Chipmaker giant Intel on Thursday announced that it would cut more than 15% of its workforce, roughly 15,000 employees, in an effort to reduce costs by $10 billion in 2025.
The decision, made in response to unsatisfactory second-quarter 2024 earnings, aims to readjust costs to increase efficiency and market competitiveness against successful rivals like NVIDIA and AMD.
“We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our headcount by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year,” said Intel CEO Pat Gelsinger in an internal memo to employees.
“This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history.”
CEO Announces Retirement program
CEO Gelsinger added that next week, the company would also announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures.
“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate…Our revenues have not grown as expected — and we’ve yet to fully benefit from powerful trends, like AI,” the Intel CEO added.
Citing an example, Gelsinger told employees that Intel’s annual revenue in 2020 was about $24 billion higher than last year’s, yet its current workforce is actually 10% higher now than it was then. “There are a lot of reasons for this, but it’s not a sustainable path forward,” he said.
Intel’s second fiscal quarter revenue was $12.8 billion, down 1% compared to the same period last year. The company attributes the loss to gross margin headwinds from the accelerated ramp of its AI PC products.
The Santa Clara, California-based company is also planning to pause dividends for those who own stock in the company starting in the fourth quarter of 2024 as part of a broader plan to cut costs and foresees “more challenging” second-half trends than it previously expected.
Gelsinger said that the company hopes to spend approximately $20 billion in 2024 and approximately $17.5 billion in 2025, with further reductions expected in 2026.
It will also reduce its R&D and marketing spend by billions each year through 2026 and reduce capital expenditures by more than 20% this year.
In addition to layoffs, the CEO added that Intel is also taking actions to make itself a leaner, simpler, and more agile company by eliminating overlapping areas of responsibility, stopping non-essential work, and reviewing all active projects and equipment.
