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Intel to "reduce" workforce by 10,500

10:44 - Tuesday 5 September 2006 by THG Reporting Team - source: Tom's Hardware

Santa Clara (CA) - Intel today announced a widely expected major restructuring process which will involve laying off and "re-deploying" employees. The company plans to shrink its workforce by 7500 people until the end of the year and by another 3000 during H1 of 2007. "Most" job reductions this year will occur in management, marketing and information technology functions, Intel said.

The restructuring affects fewer people than previously expected, but is still the most significant restructuring in Intel’s history. Facing stiff competition, the company said that the complete restructuring, involving earlier layoffs and the sale of its communications processor business to Marvell, will save about $ 2billion in operating expenses this year and about $3 billion in 2007.

Intel said that the savings are "a combination of non-workforce related steps and a significant reduction in Intel’s workforce." The company’s employee population will decline to approximately 95,000 by the end of this year, resulting "from workforce reductions, attrition and previously announced actions." The workforce will decline to approximately 92,000 by the middle of 2007 - 10,500 fewer than the company’s employee count at the end of the second quarter of 2006. Intel also expects to achieve savings in merchandising expenses, capital and materials.

Intel plans to reduce its employee count from 102,500 to 92,000

"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’s president and chief executive officer, in a prepared statement.

The reductions announced today will focus on management, marketing and information technology functions. In 2007, the company intends to "improve" efficiency in manufacturing and equipment utilization, get rid of organizational "redundancies" and improve "product design methods and processes." As a result, the reductions "will be more broadly based," the firm said.

Intel also said that it will be cutting down its capital investments by about $1 billion. However, the company apparently will not cancel any projects, but expects the savings to be available through a better utilization of "manufacturing equipment and space."

At the time of the announcement it was unclear how many Intel employees will be let go as part of the restructuring process. The fact that Intel expects $200 million in severance costs, however, indicates that a significant number of employees will be affected.

Intel has built a reputation to be one of the very few companies to lay off workers. On more dramatic occasions, the company laid off about 10% of its workforce back in 1985 and "re-deployed" about 5000 employees after the dotcom bust in 2002.