Intel has surprised the market by saying that it will cut 12,000 jobs between now and the middle of 2017, in an effort to shift its emphasis from the declining PC market, to one which powers the growing markets of the cloud and the Internet of Things (IoT). The company also said it would appoint a new CFO.
It made the announcements while flying high on a decent first quarter result with revenue of $13.7 billion, net income of $2 billion, having generated $4 billion in cash.
Brian Krzanich, Intel CEO said, “These changes will reduce our global employment by about 12,000 positions by mid-2017. We’ll do this through site consolidation, voluntary and involuntary separations, project reevaluation and an intensified focus on efficiency across a variety of programs. These are not changes we take lightly. We will be saying goodbye to colleagues who have played an important role in Intel’s success. Yet acting now gives us flexibility, flexibility to continue to invest in those Client segments that are growing, including 2-in-1, gaming, and home gateway, among others.”
Krzanich talked about, “The story of Intel’s ongoing strategic transformation.” The CFO issue came about because the current appointee, long term Intel many Stacy Smith, will shift to sales, manufacturing and operations, and a replacement money man needs to be appointed. Intel hopes to cut spending by $1.4 billion by mid-2017. Intel has revised its spending guidance down by $700 million to $20.6 billion for 2016 and says its expects to realize half of the total workforce reduction by the end of this year.
Revenue was up but each group varied. Client Computing was off 2% over last year; data center revenues was off 9% year on year while Intel’s IoT group was up 22% to $651 million. Non-Volatile Memory Solutions had revenue of $557 million, off 6% and Security was up 12% to $537 million. The recently acquired Altera, trading as the Programmable Solutions had revenue of $359 million. The stock price barely moved on the day, valuing the company at $149 billion.