By Jordan Robertson/
Associated Press
SAN JOSE, Calif. — Chip-maker Intel Corp. said Tuesday it will eliminate 10,500 jobs — about 10 percent of its work force — through layoffs, attrition and the sale of underperforming business groups as part of a massive restructuring.
The Santa Clara-based company said most of the job cuts this year will come from its management, marketing and information technology ranks, and will expand next year to include manufacturing, design and other segments.
The cuts are expected to save the company $3 billion per year by 2008. Severance costs are expected to total $200 million.
The world's largest chip maker is fighting to reverse sinking profits and regain market share stolen by smaller rival Advanced Micro Devices Inc.
''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,'' Chief Executive Paul Otellini said in a statement.
About 5,000 of the affected positions have already been eliminated this year through a previously announced management layoff, the sale of two businesses, and attrition, said Intel spokesman Chuck Mulloy.
The company plans to cut about 2,500 more jobs by the end of the year. The remainder will be shed in 2007, when Intel's headcount will settle around 92,000, Mulloy said.
Before the announcement, shares of Intel rose 11 cents to close at $19.99 Tuesday on the Nasdaq Stock Market. In after-hours trading, shares fell 26 cents to $19.73.
Intel has been under intense pressure to unload money-losing divisions and halt the encroachment of AMD on its lucrative core business making the microprocessors that act as the brains of computers.
Intel has been steadily losing profits and market share. Analysts have criticized it for reacting too slowly after AMD's 2003 launch of the critically acclaimed Opteron and Athlon 64 chips for servers and desktop PCs.
Speculation about massive job cuts has been rampant since Otellini announced in April the company was planning a broad overhaul targeting money-losing business groups in every aspect of its operations.
Intel, which had about 103,000 employees worldwide at the time, vowed to cut $1 billion in spending. It also launched the review of its business units.
Otellini said the restructuring will be as expansive as the company's transformation in the mid-1980s, when it exited a business it helped create — making dynamic random access memory chips widely used to store information in computers — to focus on microprocessors.
That shift prompted one of Intel's largest rounds of layoffs ever, with the company eliminating more than 7,000 jobs, about 30 percent of its work force at the time.
Since then, Intel has avoided large-scale layoffs. But the dot-com crash did prompt the elimination of about 11,000 jobs — largely through attrition and buyouts — in less than two years.
The latest cuts come after three months of already-frenzied streamlining.
In June, the company shed 1,400 jobs by selling a money-losing division that makes chips for cell phones and other handheld devices to Marvell Technology Group Ltd., which absorbed most of the workers in the $600 million deal.
The next month, Intel slashed 1,000 management jobs to reduce layers between top executives and supervisors. Five top executives were also reassigned to new positions, which the company said would simplify management and reduce the number of senior managers reporting to Otellini by two.
And earlier this month, Intel said it was selling its media and signaling business, which makes telecommunications motherboards and software, allowing it to shed about 600 jobs. Most of those were expected to be absorbed by Eicon Networks Corp., which bought the business for an undisclosed sum.
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