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Punishing financial results are forcing the company to take “bold action”
Intel has this week revealed that it is laying off over 15,000 workers, saying it will cut 15% of its workforce in efforts to streamline the business.
The company says the cuts are part of a drive to save $10 billion in costs by 2025, which will be achieved through various streamlining measures and spending reductions. R&D and marketing spend will be cut by more than a billion dollars through to 2026, while capex this year will be reduced by 20%.
Announcing the cuts alongside the company’s latest financial results, Intel CEO Pat Gelsinger described the decision as “incredibly hard”, saying the company is “making some of the most consequential changes in our company’s history”.
“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected,” read the memo.
Intel has been struggling to compete with rivals in the AI chip space, such as AMD and Nvidia, while also losing ground to the likes of Qualcomm and Apple, which rely on chips from Arm.
In its most recent quarterly results, Intel recorded a loss of $1.6 billion, compounding the $437 million it lost in the quarter before that. The losses can primarily be attributed to the company’s chipmaking Foundry business.
“Weaker spending across consumer and enterprise markets, especially in China, and continued focus on AI server investments in the cloud have reduced our [total addressable market] expectations for 2024,” explained CFO David Zinsner, adding that “customer inventory levels are elevated”.
Intel’s own foray into AI chips, Lunar Lake, is set to be released this September.
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