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Intel to cut workforce despite strong Q1 results

Intel says strong first quarter results show that its business transformation is working, but it also means cutting 11% of the global workforce

Intel has announced that it is to cut 12,000 jobs, despite reporting first quarter revenues of $13.7bn, up 7% compared with the same period a year ago.

Profit was also up compared with the first quarter of 2015 at $2bn, an increase of 3%.

Intel CEO Brian Krzanich said the financial results show that Intel’s ongoing strategic transformation is “progressing well”. He said this process will accelerate in 2016 as Intel evolves from a “PC company to one that powers the cloud and billions of smart, connected computing devices”.

The Intel security group was one of the best performers, with revenue of $537m, up 5% on the previous quarter and up 12% year-over-year.

Intel’s internet of things group recorded revenue of $651m, up 4% on the previous quarter and 22% compared with the same period a year ago.

The programmable solutions group reported revenue of $359m, excluding $99m of revenue as a result of acquisition-related adjustments.

Although the client computing group revenue of $7.5bn was down 14% on the previous quarter, it was up 2% year-over-year, and while the dataentre group revenue of $4bn was down 7% from the previous quarter, it was up 9% compared with the first quarter of 2015.

However, the non-volatile memory solutions group revenue of $557m was down 15% on the previous quarter and down 6% year-over-year.

Intel said strength in datacentre and internet of things groups’ revenue and a strong start for the programmable solutions group (formerly Altera) delivered $2.2bn in revenue growth and made up 40% of revenue, helping to offset the decline in the PC market and macro-economic challenges.

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Despite Krzanich’s upbeat remarks about Intel’s transformation process, underlying that process is a restructuring plan that calls for cutting around 11% of Intel’s global workforce in the next year.

The announcement has raised concerns in Ireland, where Intel currently has over 5,000 employees, according to the Irish Independent.

Intel said it is too soon to say where the job cuts will be made, but the company estimates that the restructuring initiative will cost around $1.2bn.

It added that the job cuts would take place through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs.

Intel said those affected by the cuts will be notified in the next two months. It expects the restructuring plan to deliver $750m in savings in 2016 and annual run rate savings of $1.4bn by mid-2017.

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