Intel Prepares to Slash at Least 10,000 from Payroll; Analysts Want More

Apparently having concluded an internal efficiency review launched in April, Intel CEO Paul Otellini and his executive team are reputed to be on the cusp of announcing cuts to at least 10,000 employees, according to reports at CNET and in the Wall Street Journal (subscription required).

The layoffs, which reports say will come Tuesday after the close of market trading, are not unexpected.

Intel announced in July that it would dump 1,000 managers, and it has sold two communications-chip businesses in recent months. As it has lost ground to AMD, particularly in the higher-margin server space, Intel increasingly has been pushing for greater efficiency, focus, and management accountability.

One might think a payroll reduction of 10,000 employees — about 10 percent of Intel’s workforce — would be more than enough to satisfy the ghouls on Wall Street, who typically love this sort of thing because of what it does (over time) for the bottom line, but apparently the analysts want more blood running through the cubicle corridors of Intel.

Said David Wu of Global Crown Capital:

It would be seen as lame if Intel does less than 10,000.

Added Doug Freedman, an analyst at American Technology Research:

Ten thousand would be at the low end of everyone’s expectations.

Meanwhile, Mark Edelstone of Morgan Stanley, quoted in the piece that appears in the Wall Street Journal, said staff reductions at Intel could range as high as 15,000 to 20,000, though he contends those cuts would include future sales of business units (who many more can Intel sell?). Edelstone asserts that headcount at Intel “just ballooned, almost out of control” in 2004, and that it needs to be rolled back significantly.

The impeding job cuts is are likely to take an inordinately large chunk out of Intel’s marketing staff. After doing studies comparing its staffing levels to those of its competitors, primarily AMD, Intel concluded that its ratio of marketing personnel to salespeople was too high, according to sources cited in the CNET report.

That’s all well and good, but, cutting staff will not cure Intel’s competitive torpor. Oh, it well help lower operating costs, no question, but it cannot and will not, in and of itself, address the relative lack of aggressiveness, creativity, and innovation that has afflicted Intel in recent years.

I’m no bean counter, nor do I play one on television, but perhaps Intel needs better C-level executives at least as much as it needs fewer employees.


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