Otellini Memo To Staff: Upper Management Layoffs Address 'Slow And Inefficient Decision Making'

An Intel spokesman confirmed that the chip maker had informed employees earlier today that it will be terminating 1,000 "senior and first-line" managers worldwide. The layoffs are part of an ongoing effort on Intel's part to improve efficiency within its organization, the spokesman said.

Otellini, at an April analyst conference in New York, said Intel was planning changes, including a $1 billion cut in planned spending for 2006 and a top-to-bottom review of the Santa Clara, Calif., company's entire corporate structure. "No stone will be unturned," Otellini said at the time.

In the memo to Intel employees viewed by CRN, Otellini said the layoffs are necessary because Intel needs to operate more nimbly.

"This step is important because it addresses a key problem we've found in our efficiency analysis -- slow and ineffective decision-making, resulting, in part, from too many management layers," he said.

Intel is planning to update the industry on its efficiency study, first mentioned in April, later this year. But Otellini said Intel will also take actions, such as the layoffs and the recent sale of its communications and applications processor business to Marvell, as they make sense. A brief update on the efficiency effort is also planned for Intel's second quarter earnings report, scheduled for July 19.

In the memo, Otellini said Intel is in the process of "fundamentally changing our behaviors and our structure" for where the business and industry are going. "You should expect that we should continue to take actions, including selective reductions as we complete analyses and decisions about investments, expense levels and organizational structures," he said.

Otellini also addressed the competitive market for processor pricing this year in the memo. "Competition will intensify across our product lines," he said. "Pricing will be aggressive."

Intel posted a 38 percent decrease in earnings for the first quarter to $1.35 billion, or 23 cents a share, compared with $2.18 billion, or 35 cents per share, in the year earlier period.

While many system makers are reporting a weak sales environment, Intel and rival Advanced Micro Devices, Sunnyvale, Calif., are locked in a fierce battle for market share, as each tries to provide the best price-performance story to PC makers. AMD has made significant strides in the server market recently and Intel has acknowledged missteps in the past with its server offering.

Intel last month rolled out a new dual-core server processor on its latest architecture and is slated to roll out improved desktop processors July 27.