Intel Announces Restructuring Initiative to Accelerate Transformation
SANTA CLARA, Calif., April 19, 2016 - Intel Corporation today announced a restructuring initiative to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices. Intel will intensify its focus in high-growth areas where it is positioned for long-term leadership, customer value and growth, while making the company more efficient and profitable.
The data center and Internet of Things (IoT) businesses are Intel's primary growth engines, with memory and field programmable gate arrays (FPGAs) accelerating these opportunities - fueling a virtuous cycle of growth for the company. These growth businesses delivered $2.2 billion in revenue growth last year, and made up 40 percent of revenue and the majority of operating profit, which largely offset the decline in the PC market segment.
The restructuring initiative was outlined in an e-mail from Intel CEO Brian Krzanich to Intel employees.
"Our results over the last year demonstrate a strategy that is working and a solid foundation for growth," said Krzanich. "The opportunity now is to accelerate this momentum and build on our strengths.
"These actions drive long-term change to further establish Intel as the leader for the smart, connected world," he added. "I am confident that we'll emerge as a more productive company with broader reach and sharper execution."
While making the company more efficient, Intel plans to increase investments in the products and technologies that that will fuel revenue growth, and drive more profitable mobile and PC businesses. Through this comprehensive initiative, the company plans to increase investments in its data center, IoT, memory and connectivity businesses, as well as growing client segments such as 2-in-1s, gaming and home gateways.
These changes will result in the reduction of up to 12,000 positions globally -- approximately 11 percent of employees -- by mid-2017 through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs. The majority of these actions will be communicated to affected employees over the next 60 days with some actions spanning in to 2017.
Intel expects the program to deliver $750 million in savings this year and annual run rate savings of $1.4 billion by mid-2017. The company will record a one-time charge of approximately $1.2 billion in the second quarter.
Webcast Intel also announced first-quarter 2016 earnings today. The company will discuss the restructuring initiative during the earnings webcast scheduled today at 2:00 pm PDT on its Investor Relations website at www.intc.com. A webcast replay and audio download will also be available on the site.
According to Krzanich, the layoffs will result in "the highest revenue per employee in Intel's history."
For a while in class, I used former Intel CEO Paul Otellini's email announcing layoffs of about 1,000 managers. That seems like child's play now.
- How would you summarize Krzanich's rationale for the layoffs?
- 12,000 is a big number. How well does Krzanich justify the decision? What should be done internally?