Intel’s CEO, Pat Gelsinger, announced a major restructuring plan for the tech giant, aiming to deliver $10 billion in cost savings by 2025. This includes reducing the company’s workforce by 15% or approximately 15,000 roles. The move, driven by lower than expected revenue growth and a need to align with new market realities, also involves simplifying portfolios, reducing operational costs, and suspending dividends. Despite these changes, Gelsinger emphasises Intel’s ongoing commitment to its IDM 2.0 strategy, maintaining key investments in process technology and core product leadership.
- Intel plans to reduce operational costs by $10 billion in 2025, which includes cutting approximately 15,000 jobs (15% of its workforce).
- The company aims to simplify its portfolio, eliminate complexity, reduce capital and other costs, and suspend its stock dividend to prioritise investments in the business.
- Despite the challenging changes, Intel remains committed to its IDM 2.0 strategy, focusing on process technology leadership, expanding manufacturing capacity, and delivering AI Everywhere to drive future growth.
Intel’s Transformation Plan Underway
In a recent internal message to employees, Intel’s CEO, Pat Gelsinger, revealed the next phase of the tech company’s transformation. The letter, which came to light after the company’s second-quarter 2024 earnings release, communicates some radical and consequential changes that the company is planning.
Cost-Cutting Measures
Intel’s transformation plan revolves heavily around cost-cutting measures, with Gelsinger announcing intentions to deliver $10 billion in cost savings by 2025. Part of these savings will come from a workforce reduction of approximately 15,000 roles, accounting for nearly 15% of the total workforce. The majority of these actions are expected to be completed by the end of 2024.
“This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history.”
Realigning Operations and Company-Wide Changes
In a bid to align its cost structure with the new operating model, Intel aims to fundamentally change the way it operates. The company acknowledges that its revenues have not grown as expected, and that it has yet to fully benefit from powerful trends such as AI.
In the coming weeks, Intel plans to unveil an enhanced retirement offering for eligible employees, and will also offer an application programme for voluntary departures. These changes are seen as essential to the company’s future, as a recent review revealed that Intel’s cost structure is not competitive.
Streamlining Operations
In addition to cost savings, Intel also plans to streamline its operations. This includes simplifying its product portfolio, reducing operational complexity, and fostering a culture of greater ownership and accountability. The company also plans to suspend its stock dividend from next quarter to prioritise business investments and drive sustained profitability.
Maintaining Key Investments
While the company is implementing significant changes to its operations and cost structure, Gelsinger reassured employees that Intel’s IDM 2.0 strategy remains unchanged, with the company maintaining key investments in its process technology and product leadership.
Final Thoughts
Intel’s announcement indicates a significant shift in the company’s operational and financial strategy. The proposed changes, though radical and potentially painful in the short term, may prove necessary for the tech giant’s long-term survival and success. It’s a reminder that even the most established companies must continually adapt to new market realities and innovate to stay competitive.
Without a doubt, this is a challenging time for Intel and its employees. However, if the company can successfully implement these changes and realign its cost structure, it could emerge stronger, leaner, and more agile, ready to capitalise on future technological trends.
FAQ
Q: Why is Intel reducing its headcount by roughly 15,000 roles?
A: Intel is reducing its headcount to align its cost structure with its new operating model and address the fact that its revenues have not grown as expected. This action is part of the company’s plan to deliver $10 billion in cost savings in 2025.
Q: What are some of the key priorities outlined by Intel’s CEO?
A: Some of the key priorities highlighted by Intel’s CEO include reducing operational costs, simplifying the company’s portfolio, eliminating complexity, reducing capital and other costs, suspending the stock dividend, and maintaining growth investments in the IDM 2.0 strategy.
Q: What prompted Intel to take these actions now?
A: Intel decided to take these actions now after assessing the business against benchmarks for high-performing foundries, fabless product companies, and corporate functions. The company realised that its cost structure is not competitive and that operational changes were necessary to ensure sustainability and competitiveness in the market.
Q: How will Intel simplify its portfolio?
A: Intel plans to simplify its portfolio by conducting a review of each business unit to identify underperforming products. The company will also integrate key software assets into its business units to accelerate the shift to systems-based solutions and focus on fewer, more impactful projects.
Q: What is Intel’s approach to maintaining growth investments?
A: Intel’s IDM 2.0 strategy remains unchanged, focusing on re-establishing process technology leadership, expanding manufacturing capacity in the U.S. and EU, becoming a leading-edge foundry, rebuilding product portfolio leadership and delivering AI Everywhere. Despite cost-cutting measures, the company will continue key investments in innovation and core product leadership.
