Intel announces plans for major cost reductions over the next five years

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Intel Corporation announced Monday that it plans to reduce its worldwide workforce by 12,000 employees over the next year and a half, as part of an overall strategy to reduce costs by $10 billion over the next five years. The strategy will also result in $700 million in savings through lower spending on infrastructure and real estate, according to Intel’s press release. About 6,200 workers are expected to leave of their own volition, while 5,800 will be let go after performance evaluations during the first half of 2016.

After the chipmaker provided lower-than-anticipated profits projections for the whole fiscal year but stated that it will achieve up to $10 billion in cost savings and efficiency enhancements, Intel shares rose as much as 7% in extended trading on Thursday.

Here is how the business fared:

Earnings: 59 cents per share, adjusted, as opposed to the analysts’ consensus estimate of 32 cents per share, according to Refinitiv.
According to Refinitiv, revenue was $15.34 billion as opposed to the $15.25 billion experts had predicted.

The quarter, which concluded on October 1, saw a 15% year-over-year fall in total sales. Revenue decreased 22% over the prior quarter. The company’s net income decreased from $6.82 billion in the same period last year to $1.02 billion this quarter.

On a conference call with analysts, CEO Pat Gelsinger stated, “We are planning for the economic uncertainty to persist beyond 2023.” According to Intel’s financial director David Zinsner, there may be a worldwide recession.

According to Intel, it plans to cut operational costs and sales costs by $3 billion in 2023, with an additional $8 to $10 billion in yearly savings expected by the end of 2025. In an effort to slash expenses, Bloomberg reported earlier this month that Intel planned to lay off thousands of workers, maybe. Days later, The Oregonian reported that Gelsinger had informed staff that cost-cutting measures will be implemented by the business.

“Steps to optimise our headcount will be included in our efforts. These are challenging choices that will impact our devoted Intel family, Gelsinger stated on the call on Thursday.

Revenue for the company’s Client Computing Group, which includes PC chips, was $8.12 billion, down 17% but higher than the $7.58 billion consensus estimate of the analysts StreetAccount surveyed. After customers purchased PCs for two years to work, study, and play games from home throughout the epidemic, technology market analyst Gartner said that PC shipments fell roughly 20% in the third quarter.

According to Intel, the consumer and educational segments saw a decline in PC demand during the quarter, while device manufacturers saw a decrease in their inventory.

With server chips, memory, and field-programmable gate arrays included, the company’s Datacenter and AI division reported $4.21 billion in revenue, a 27% decrease from the StreetAccount average estimate of $4.67 billion.

The enterprise in China continued to exhibit symptoms of weakness, as do some, but not all, cloud clients, but the data centre TAM is holding up better, according to Gelsinger. According to him, Intel’s market share increased more slowly in the data centre segment than it did overall.

The $2.27 billion in sales generated by the Network and Edge business, which includes networking devices, was up 14% but less than the $2.40 billion StreetAccount expectation.

During the quarter, Intel announced that MediaTek will use Intel Foundry Services for chip manufacture, and the firm also started ground on a manufacturing site as part of a $20 billion investment in Ohio.

Additionally, Mobileye, a maker of autonomous driving technology sponsored by Intel, began trading on the Nasdaq on Wednesday. It was acquired by Intel in 2017 and is still under their ownership.

The prediction for the entire fiscal year was reduced by management. Currently, the business expects adjusted profits per share of $1.95 and sales of $63 billion to $64 billion, down from adjusted earnings per share of $2.30 and revenue of $65 billion to $68 billion three months ago. That suggests a loss of revenue of close to 20%. Refinitiv’s poll of analysts had predicted adjusted earnings per share of $2.15 and revenue of $65.26 billion.

Despite the after-hours action, Intel shares have down roughly 49% thus far in 2022, compared to a 20% decline for the S&P 500 index over the same time period.

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