Intel announced this week that it will cut more than 15% of its workforce and suspend dividend payments starting in the fourth quarter in an attempt to turn around its loss-making chip-making business. The Santa Clara, California-based company faces significant financial difficulties.
Intel shares fell 15% in trading after the regular market closed, resulting in a loss of $18 billion in stock market value. On Thursday, shares were already down 7%, in line with a general drop in U.S. chip stocks following Arm Holdings' conservative forecasts. Most of the job cuts will be completed by the end of 2024, according to Intel. The company had a payroll of 124,800 employees at the end of 2023. "I need fewer people at headquarters and more people in the field supporting customers," said CEO Pat Gelsinger.
Mastering Copilot for business efficiency
In addition to the staff cuts, Intel plans to reduce operating expenses and cut capital spending by more than $10 billion by 2025. The moves are part of a broader effort to address the huge costs and heavy investments the company has made to expand its manufacturing capacity and compete with Taiwan's TSMC".
A $10 billion cost-cutting plan shows that management is willing to take bold and drastic steps to right the ship and fix the problems", said Michael Schulman, chief investment officer at Running Point Capital. However, he added that there is skepticism about whether these measures will be enough or whether they are an overdue reaction, given that Gelsinger has been at the helm for more than three years.
As part of its cost-cutting plan, Intel expects capital expenditures in 2024 to be between $25 billion and $27 billion. In addition, the company is targeting gross capital expenditures of between $20 billion and $23 billion by 2025. The company faces a critical crossroads as it attempts to stabilize its business and regain investor confidence. The company's next steps will be closely watched to determine whether its strategies will be sufficient to reverse its current trajectory and improve its position in the competitive chip market.
