Intel plans to lay off 15,000 employees. Read the letter by the CEO
Intel plans to lay off 15,000 employees. Read the letter by the CEO
Company faces intense pressure from Nvidia and AMD, aims to realign costs and boost innovation
Intel has announced plans to lay off 15% of its workforce, impacting approximately 15,000 employees, as part of a broader strategy to cut costs by over $10 billion by fiscal 2025. The company’s CEO, Pat Gelsinger, communicated the difficult decision through an internal memo, highlighting the need to align costs with a new operating model. He emphasized that Intel’s current financial performance necessitated bold actions to address high costs and low margins.
The plan includes enhanced retirement offerings and voluntary departure programs to mitigate the impact on employees. Intel will also suspend its dividend starting in the fourth quarter and make significant cuts in operating and capital expenses.
In an open letter to employees, Gelsinger wrote, “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.”
This restructuring comes as Intel faces intense competition from Nvidia and AMD in the fast-paced AI market. Despite these challenges, Gelsinger remains optimistic that the company can leverage this restructuring to refocus on key areas and drive future growth.
Intel’s second-quarter revenue was reported at $12.8 billion, a 1% decline year-over-year. This financial performance led to a significant drop in Intel’s stock price, which plummeted over 20% in after-hours trading to $23.09 per share. The company’s market capitalization now stands at $121.21 billion, in stark contrast to Nvidia’s $2.38 trillion and AMD’s $205 billion.
An anonymous CTO from an SP500 company commented on the situation, acknowledging the competitive pressures Intel faces. “Frankly it’s difficult in this highly dynamic and fast-moving AI market where innovation and discoveries are happening on a near daily basis for Intel to keep up,” he said. However, he also noted that the layoffs could provide Intel with the financial resources needed to reenergize and focus on the right areas for the future.
The CTO added, “It’s always difficult to learn that so many people’s lives are affected because of the downward pressure this industry can place on technology companies to stay current with the rapid nature of innovation and development.”
Earlier this year, Intel had made headlines for other strategic moves aimed at navigating the competitive landscape, but this latest announcement underscores the significant challenges the company faces as it seeks to maintain its position in the industry.
