Intel has announced a major restructuring initiative with the reduction of 11 percent of its workforce. It also said it was moving its CFO to a new role and posted first-quarter revenues up 7 percent from the year before. Intel said the restructuring will accelerate its transformation from a PC company into one that powers the cloud and billions of smart, connected computing devices. To achieve this, the company will cut 12,000 positions worldwide by mid-2017.
The reductions will be achieved by site consolidations, voluntary and involuntary departures and a re-evaluation of programmes and result in a one-off charge of USD 1.2 billion in the second quarter. They are expected to deliver USD 750 million in savings this year and USD 1.4 billion on an annual run rate by mid-2017.
Intel will then intensify its focus in high-growth areas where it is positioned for long-term leadership, customer value and growth, and making itself more efficient and profitable. The company explained that the data centre and Internet of Things (IoT) businesses are its primary growth engines, pushed by memory and field programmable gate arrays (FPGAs). These businesses delivered USD 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. Intel will also increase investments in the products and technologies that that will fuel revenue growth, and drive more profitable mobile and PC businesses. 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.
The restructuring initiative was outlined in an e-mail from Intel CEO Brian Krzanich to Intel employees. The company also announced executive changes. CFO Stacy Smith will be moving to a new role at the company, leading sales, manufacturing and operations. The search for a new CFO has already started.
Revenues for Q1 rose 7 percent year-on-year to USD 13.7 billion, less than the company's guidance of USD 14.0 billion, while operating profit was flat at USD 2.6 billion. Net profit increased 3 percent to USD 2.0 billion, and earnings per share were 2 percent higher at USD 0.42. On a sequential basis, all figures were down. Revenues jumped 22 percent from the year before at the Internet of Things Group, lifted 2 percent year-on-year to USD 7.5 billion at the Client Computing Group, rose 9 percent at the Data Center Group and advanced 12 percent at the Intel Security Group. Revenues fell 6 percent at the Non-Volatile Memory Solutions Group.
Looking forward, Intel is guiding for revenues at USD 13.5 billion (+/- USD 500 million) for the second quarter. For the full year, the company expects a mid-single digit increase in revenue, down from the company’s previous outlook of mid to high-single digits.
