Intel just announced it was slashing its workforce by 11 percent, calling it in all its corporate press-speak glory “a restructuring to accelerate its transformation.” Sure.
What it means in real human terms is that 12,000 people will be losing their jobs worldwide, and that is never a good thing to hear.
“These are not changes we take lightly,” Intel CEO Brian Krzanich said in a call with analysts and reporters.
“Acting now enables us to increase our investments in areas that are critical for our future success. This is a comprehensive initiative. We will emerge as a more collaborative, productive company with broader reach,” he said.
The fact is that Intel is a desktop computer chip maker at a time when desktop computers aren’t doing very well, and as PC sales dropped, something had to give.
Intel is trying to transform, as it so eloquently put it in its announcement, into a company that does more than provide chips for computers. In a time when people are buying more mobile devices and tablets, it’s not an area in which Intel has excelled.
Clearly Krzanich recognizes this, even if the word choice left something to be desired. “We’ve talked about this transformation where we are moving from a client-centric [model] to a company that focuses more and more on a broader set of products — the cloud and all the connected devices that connect to that cloud and the connectivity that brings those devices to the cloud. That includes the PC but it’s much more than that,” he said.
“We’ve made enough progress now,” he said, and added that this move now allows it to “push the company all the way to this transformation.”
To a large extent he’s talking about the shift in emphasis to the cloud and Internet of Things, those connected devices that will be generating increasing amounts of data in the coming decade. Intel is hoping to get a piece of that cloud and IoT action.
To that end, Intel announced a chip family geared for cloud workloads at the end of last month. The Intel Xeon processor E5-2600 v4 product set is designed to optimize software-defined clouds, according the company.
Meanwhile, as 12,000 people see their jobs disappear, The Wall Street Journal reported in February that the company paid a whopping $25 million — including an $8.1 million signing bonus and restricted stock valued at an additional $ 8.1 million — to recruit former Qualcomm executive Venkata ‘Murthy’ Renduchintala to take over the ailing chip division.
Perhaps it’s not a coincidence that Intel Capital, the investing arm of Intel, announced a shift in investing strategy in February, looking to invest in companies that Intel Capital president Wendell Brooks stated “complement what we do.”
In a statement Intel outlined the financial particulars of the decision:
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.
The majority of affected employees will be informed within 60 days with all the job reductions completed by mid-2017, according to the company.