Intel to lay off workers, adjusts forecast down

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Intel to lay off workers, adjusts forecast down
Pat Gelsinger, Intel

Intel has cut its 2022 revenue forecast for the second time this year with chief executive Pat Gelsinger, asked about potential layoffs, telling Reuters "people actions" would indeed be part of a cost reduction plan.

Intel shares jumped 6 per cent in after-hours trade.

They had slumped roughly 47 per cent so far this year, underperforming both the S&P 500 index and the Philadelphia SE Semiconductor index.

In its earnings release Intel said it was focused on driving US$3 billion in cost reductions in 2023.

"The amount that we can do with respect to people costs is a minority of our overall cost structure," Gelsinger said.

"So driving efficiency in the factory network is way more important to our economics than people cost," Gelsinger told Reuters, adding that adjustments of flexible workforces can be "quite immediate".

The adjustments would start in the fourth quarter, he said, but did not specify how many employees would be affected.

Intel had 110,600 employees in late 2020, right before Gelsinger took the helm.

That ballooned to 131,500 by early October this year.

Net income for the third quarter ended October 1 was US$1.02 billion, or 25 cents per share, down sharply from profit of US$6.82 billion, or US$1.67 per share, a year earlier

A slump in PC demand and recession fears have muddied the outlook for the data center market, both big markets for Intel.

Intel's "PC Client business was the silver lining as sales grew sequentially giving investors some hope that share loss has moderated materially," said Summit Insights Group analyst Kinngai Chan.

"We believe its data center share loss should also moderate going into next year."

Surging inflation has hit demand for computers and other gadgets, forcing electronics companies to cancel orders for components such as chips as they struggle to clear inventory.

PC shipments fell 15.5 per cent in the third quarter, data from Counterpoint Research showed.

The research firm expects a 13 per cent drop for the full year, higher than Intel's estimate of a roughly 10 per cent decline.

Chipmakers have also come under pressure from concerns that the threat of a global recession could prompt clients from the more lucrative data center market to wind down spending.

The company now expects annual revenue of about US$63 billion to US$64 billion, compared with US$65 billion to US$68 billion estimated earlier.

Its original forecast was for about US$76 billion.

Analysts on average expect annual revenue of US$65.26 billion, according to Refinitiv data.


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