Intel Overhaul Includes Cutting 10,500 Jobs

Intel Corp., the world’s largest semiconductor maker, will cut 10,500 jobs as part of a plan by Chief Executive Officer Paul Otellini to reduce costs by $3 billion annually starting in 2008.Intel will have 92,000 employees by the middle of 2007, down from 102,500 at the end of the second quarter of this year, the company said today in a statement distributed by Business Wire. The figure includes 3,000 previously announced reductions. Analysts including Mark Edelstone at Morgan Stanley predicted Intel would shed at least 10,000 jobs without the earlier cuts.Mr. Otellini is conducting the largest overhaul of Intel’s operations since the 1980s after market share losses to Advanced Micro Devices Inc. hurt sales and profit. In April, Santa Clara, California-based Intel forecast a drop in annual sales for the first time in five years.“We would like to see the top line start to grow before we buy the stock just on the cost reduction story,” said David Garrity, director of research at New York-based Dinosaur Securities, who is advising clients refrain from buying Intel shares. He spoke before the announcement.Shares of Intel fell 33 cents, or 1.7%, to $19.66 at 4 p.m. Eastern Standard Time in Nasdaq Stock Market composite trading. The stock has fallen 20% this year.The company said it expects about $200 million in costs associated with the measures, offsetting some of the planned savings. Intel said it will save about $2 billion in 2007.While Intel tried to create new markets for its personal computer microprocessors, its closest competitor gained ground. Sunnyvale, Californiabased Advanced Micro had 22% of the market for chips that power PCs at the end of the second quarter, up from 16% a year earlier.Today’s announcement includes 1,000 management jobs eliminated in July and the announced sale of two telecommunications units that will shave 2,000 more people from the payroll by year’s end. Before those announcements Intel had 102,500 employees at the end of the second quarter.“They have to go back to their roots, go back to what they know how to do, which is microprocessors for notebooks, desktops and servers,” said Hans Mosesmann, an analyst at Moors & Cabot Inc.in New York. He has a ‘buy’ rating on Intel’s stock and a ‘sell’ on Advanced Micro. He spoke before the announcement.Intel, whose net income rose 15% last year, may report a 45% decline in profit in 2006, analysts surveyed by Thomson Financial project. In the second quarter, Intel posted its biggest profit drop in more than four years.The job reductions by Mr. Otellini, 55,end a hiring binge in which Intel has added more than 20,000 employees since 2003, when it had 79,700 employees, according to a regulatory filing.The Silicon Valley area of California near San Francisco, home to many American technology companies, has been cutting jobs since the technology bubble burst in 2001.In May, computer server maker Sun Microsystems Inc. said it would cut 13% of its workforce, or 5,000 jobs. That announcement came less than a year after Hewlett-Packard Co. Chief Executive Officer Mark Hurd began job cuts that will reduce his payroll by 15,300.

Intel Overhaul Includes Cutting 10,500 Jobs

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