'Painful News:' Intel Plans To Lay Off 15,000, Cut $10B In Costs

‘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. These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career,’ writes Intel CEO Pat Gelsinger in an open letter to employees.

Semiconductor giant Intel Thursday said it would lay off more than 15 percent of its workforce as part of a plan that’s aimed at reducing costs by over $10 billion in its fiscal 2025.

The plan, unveiled along with the Santa Clara, Calif.-based company’s second fiscal quarter 2024 financials, includes the elimination of roughly 15,000 jobs, large cuts in operating and capital expenses, and suspension of the company’s dividend starting in the fourth quarter. The majority of these cuts will be completed by the end of this year, Intel CEO Pat Gelsinger said.

“This is painful news for me to share,” wrote Gelsinger in an open letter to Intel employees posted on the company website. “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.”

The news comes the same day that Intel reported second-quarter revenue of $12.8 billion, down 1 percent year over year. Intel stock plummeted more than 20 percent in after-hours trading Thursday to $23.09 a share. The stock has fallen by nearly 40 percent this year. Intel’s total market cap Thursday stood at $121.21 billion compared with Nvidia’s total market cap of $2.38 trillion and AMD’s $205 billion.

[Related: Intel’s 9 Biggest Moves Under Pat Gelsinger In His First 3 Years As CEO]

Gelsinger wrote that Intel has to align its cost structure with its new operating model and fundamentally change how it operates.

“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” he wrote. “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. These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career.”

The chief technology officer of an SP500 company, who did not want to be identified, said the job cuts and the latest financial results are yet another sign of the intense pressure Intel is facing from both Nvidia and AMD.

“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,” said the CTO. “Conversely this potentially gives Intel the financial resources to reenergize and refocus on the right areas for the future. Customers still want and highly value Intel and even when there are challenges Intel has continued to innovate and evolve. Hopefully this restructuring will springboard them into a new wave of growth.”

The CTO said it is always disappointing to see large staff reductions from an industry icon like Intel.

“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,” he said.

In addition to the layoffs, Intel is planning to make several other changes to realign its costs.

This includes:

Bob Venero, president and CEO of Future Tech, Fort Lauderdale, Fla., No. 76 on the CRN SP500, said he was heartened to see that Intel is stepping back and restructuring to ultimately become more competitive versus Nvidia and AMD.

“When you are at the top of the hill like Intel and you are facing competitors like Nvidia and AMD that are more nimble sometimes you need to step back and look at how you can invest in innovative changes that allow them to take advantage of the AI ecosystem that is out there inclusive of Nvidia and AMD,” he said.

With Intel’s position as an engine for the entire IT ecosystem, the company needs to be careful not to try to be everything to all people, said Venero. “Sometimes when you do that you lose focus on what you are really good at,” he said.

Venero said there is no one better to drive an Intel resurgence in the midst of the AI revolution than Intel CEO Pat Gelsinger. “It would be a mistake to discount Intel and Pat,” he said. “If there is anyone that can make Intel a leader once again it is Pat!”

One bright spot in the Intel quarterly results is client computing group sales, which were up nine percent to $7.4 billion.

To that point, Venero said, Future Tech has seen robust double-digit growth in its Intel based PC as a service business in global 100 accounts. “You have to look at how many Intel based laptops and desktops are out there in businesses,” he said. “When you want bread and butter PC performance you turn to Intel!”

During the quarter, Intel reported client computing revenue of $7.41 billion, up from last year’s $6.78 billion; data center and AI revenue of $3.05 billion, down from $3.16 billion; and network and edge revenue of $1.34 billion, down from $1.36 billion.

On the Intel Foundry side, the company reported revenue of $4.32 billion, up from $4.17 billion.

For the quarter, Intel reported a GAAP net loss of $1.61 billion or 38 cents per share, a significant change from last year’s net income of $1.47 billion or 25 cents per share. On a non-GAAP basis, Intel reported net income of $83 million or 2 cents per share, down from last year’s net income of $547 million or 13 cents per share.

Steve Burke contributed to this story.