Intel axes 12,000 jobs as it looks to break away from PCs

Intel logo.

The Intel logo on display at Computex 2015 in Taipei.

Credit: Martyn Williams

The company looks to diversify from PCs into the growth areas of IoT and servers

Intel is cutting 12,000 jobs worldwide as the company restructures operations to diversify from PCs into growth areas of IoT and servers.

The layoffs account for about 11 percent of employees worldwide. Intel is also consolidating work locations worldwide in a move the company hopes will save it $750 million this year.

Data center equipment will be Intel's growth area growing forward, generating a large part of Intel's profits and potentially making up for the declines in the PC market.

Growth drivers will include memory and field-programmable gate array (FPGA) technology, which the company added from its recent $16.7 billion acquisition of Altera, CEO Brian Krzanich said.

Intel's chip fortunes under threat in several areas

The slowdown in PC shipments has hurt Intel's chip business. Worldwide PC shipments totaled 60.6 million units in this year's first quarter, declining by 11.6 percent compared to the same quarter a year ago, IDC said this month.

Intel has failed for many years in its efforts to break into the mobile device market despite an aggressive approach. Its Atom chips are in a handful of smartphones, but the company is doing better in a fast-declining tablet market.

Servers are Intel most profitable unit but are also under growing threat from rival chip makers. Working with Rackspace, Google -- one of the largest server buyers in the world -- is designing a server based on IBM's Power 9 architecture and is also reportedly backing an ARM server chip from Qualcomm. Google's moves threaten Intel's dominance.

Intel is chasing the IoT market through acquisitions and by wooing hobbyists and makers. It has spent millions of dollars producing the TV show "America's Greatest Makers," which is an advertising vehicle for its development boards.

Intel also has innovations such as Optane storage in the pipeline that could improve PC usage.

Intel will take a charge of $1.2 billion in the second quarter related to the restructuring. Intel had about 104,800 employees in 72 countries at the end of the 2015, according to the company's annual IT performance report.

Management shakeup

Krzanich is also shaking up the management to shape the company in his vision. He recently appointed a new second in command in former Qualcomm executive, Venkata Renduchintala, who will lead the PC, Internet of things, and software business as president of the client and IoT businesses and Systems Architecture Group.

Renduchintala's appointment squeezed out former PC business chief, Kirk Skaugen, who is leaving the company. Mobile chief Aicha Evans has already left the company, and IoT chief Doug Davis is retiring.

Intel also announced that Stacy Smith was moving from the role of chief financial officer to lead sales, manufacturing and operations. He will take the position once a replacement is found.

The 12,000 layoffs were announced on the same day Intel announced its first-quarter results. Intel reported a profit of $2 billion for the first quarter of 2016, growing by 3 percent compared to the same quarter a year ago.

It reported revenue of $13.7 billion for the quarter, growing by 7 percent compared to the year-ago quarter.

Revenue for the Client Computing Group, which deals in PC and mobile chips, was $7.5 billion, up 2 percent year-over-year. Revenue for the Data Center Group, which deals in server chips and data-center equipment was $4 billion, growing by 9 percent.

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