Intel is planning redundancies in response to falling profits and market share.
The company predicts that sales this year are set to fall by 3%, and profits could slump from $12.1bn (£7.1bn) last year to $9.3bn in 2006.
In addition, Intel admits that AMD is gradually eating into its market share in all segments of the market.
Intel chief executive officer Paul Otellini told analysts that the company was planning lay-offs over the next 90 days.
Otellini has ordered a root-and-branch review of the company’s business and structure, and said jobs would start to go before the review was finished in 90 days' time.
Otellini said the company had no firm headcount cull number in mind at this stage, but that action would be swift to address Intel's poorer performance.
Although Intel is still one of the most profitable companies in the IT industry, investors are demanding more.
The company currently employs around 100,000.