Intel to Cuts Jobs Throughout ’06

Intel will continue its corporate reorganization through the end of 2006, stretching beyond the 90-day window promised by Chief Executive Officer Paul Otellini.

On the heels of announcing July 13 it would lay off 1,000 managers, the company plans to roll out additional changes in its effort to recapture slipping profits, said Donald MacDonald, vice president and general manager of the digital home group at Intel of Santa Clara, Calif.

He denied industry rumors that executives had been ordered to cut a much larger number of jobs; some analysts have predicted Intel would cut another 10,000 jobs before it announces quarterly earnings Wednesday.

However, MacDonald did acknowledge that Intel executives are looking for redundancies in the business structure of their 100,000-person company.

“Nothing is off the table,” MacDonald said. “Look at our messaging team; we don’t launch a new product every day, so why do we need a messaging team in every department?”

Likewise, the company could assign more tasks to its outside public relations agency instead of duplicating their work with corporate PR workers. And Intel could simplify its product line, reducing the number of chip variants, or SKUs, it sells.

Intel seems to be making a collection of modest changes to scattered departments, but in truth they all contribute to Otellini’s vision of a more efficient company, MacDonald said.

“This is not ‘death by a thousand cuts,’ ” MacDonald said. “If it didn’t involve people, this would be a really exciting time for the company. But I had to lay some people off on Friday, and it was horrible.”

The reorganization began in April when Otellini told investors that Intel’s weak first-quarter performance would continue through the rest of the year, driving the company to a forecast annual profit of US$9.3 billion, down from $12.1 billion in 2005.

Intel is suffering from a slump in the growth rate of PC sales, excess inventory of microprocessors at retailers and a loss of market share to competitor Advanced Micro Devices.

In response, Otellini pledged to reorganize the company over the next 90 days. Since then, Intel has combined its NAND and NOR flash memory groups, sold off its XScale smartphone processor division to Marvell Technology Group for $600 million, and initiated the managers’ layoffs.

Although Intel has not yet delivered the single round of heavy layoffs that some financial analysts are calling for, its process of announcing a series of smaller changes will be just as effective, MacDonald said.

“We had become bloated. It’s like middle-age spread,” he said, patting his belly. “You don’t know how it happens, but one day you look down and it’s there.”

“As a senior manager, I bear some responsibility. And now we have to mop up the mess.”

Toshiba made a similar mistake after that company saw great success as the top vendor of laptops around 1996, he said. They soon started making additional computer models, like desktops and servers, and lost their focus.

By acting today, Intel hopes to avoid that fate and retain its status as the world’s largest semiconductor maker.

-Ben Ames, IDG News Service (Boston Bureau)

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