Intel fires 1,000 executives
13 July, 2006
By Steve Wexler
Less than three months ago Intel CEO Paul Otellini told analysts
the company was undergoing a 90-day review intended to identify
how the chip giant could slash $1 billion from its annual
expenses and turn around its recent lackluster financial performance.
The review, the most extensive examination of all aspects
of the company in the last 20 years, is ongoing and could
even be extended.
However the company said it wouldn't wait for the review to
be completed if changes were needed, and the first major announcement
was at the end of June, when Marvell Technology Group Ltd.
bought Intel's communications and application processor business
for $600 million (U.S.) plus the assumption by Marvell of
certain liabilities. The second major change surfaced Thursday
morning with the announcement of the elimination of 1,000
management positions.
"This morning we informed employees that we are reducing
the number of managers in the company worldwide by 1,000,"
said Intel spokesman Chuck Mulloy. "It's one of the first
actions we're taking in the structural efficiency project,
to both reduce costs and improve decision making and decisions
within the company."
Only managers are affected by today's action, with the cuts
coming from all geographic regions and all business units,
and ranging from first-line managers to senior managers. Mulloy
said the review, which included benchmarking from within and
without the industry, indicated that Intel had too many management
levels to be effective. Over recent years the growth in the
number of managers had exceeded the overall growth of the
company. "We determined decision making wasn't as crisp
as it needed to be."
Another report which was looking for Intel to cut between
10,000 to 15,000 of its current 100,000 staff was dismissed
as speculation by Mulloy. He said the efficiency analysis
process started in late April is ongoing and may even be extended
if warranted. The company will provide a brief update at next
week's conference call on third-quarter results, but that
nothing substantive will be announced at that time.
Intel has been struggling for some time, failing to meet
its financial targets recently. According to Technology Business
Research, Intel is too dependent on a PC market that is experiencing
rapidly declining ASPs and slowing growth. TBR recommended
that the company focus on operating efficiency to reduce costs
at the same rate that ASPs decline. In addition, it needs
to establish a strong presence in emerging markets, where
most of the PC growth will occur in the next decade.
Despite steadily growing competition from AMD, TBR said Intel
is still the best-positioned player in the semiconductor industry,
controlling more than 80% of the PC microprocessor market.
Commenting on the Marvell deal, Rob Enderle, principal analyst
for the San Jose, Calif.-based Enderle Group, said Intel dramatically
needed to focus on its' core businesses and the communications
chip unit was one of many distractions it didn't need. "They
could have simply shut down the unit; by selling it they recoup
at least some of their investment," he said.
Warren Shiau, senior associate and lead analyst of IT research
for The Strategic Counsel, agreed that Intel was riding itself
of a financial burden. "They got into communications
chips figuring it would be a hot market; instead it's been
(in general) commoditizing with pretty slim margins and a
lot of excess capacity being carried as overhead," he
said.
Mulloy wouldn't speculate as to when details of any other
potential changes resulting from the ongoing review will be
revealed. According to Otellini, Intel is focusing on non-performing
units, capital efficiencies and cost per unit.
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