Intel will cut about 5,000 jobs as it continues to negotiate its way through a rapidly changing tech industry that is moving away from the chip maker's strengths in PCs and servers.
The job losses will reduce Intel's global workforce of about 107,000 by 5 percent and come a day after executives on Jan. 16 announced middling fourth-quarter and yearlong financial numbers. The company saw its PC chips business begin to stabilize a bit in the quarter, but its enterprise business—which includes processors for data center servers—struggled more than officials had expected.
Intel spokesman Chris Kraeuter told Reuters Jan. 17 that the job cuts are "part of aligning our human resources to meet business needs," though he wasn't specific about where the job cuts would come from.
Intel's revenues for the fourth quarter hit $13.8 billion, a 3 percent increase over the same period in 2012. The income was $2.6 billion, a 6 percent jump. For the full year, revenues declined 1 percent, to $52.7 billion, and income decreased 13 percent, to $9.6 billion. Looking forward, Intel executives said revenues in the first quarter will be about $12.8 billion, with revenues for the whole year being flat.
The numbers and outlook disappointed Wall Street, and the company's stock took a slight hit, falling 2.6 percent Jan. 17.
The slowing worldwide sales of PCs over the past couple of years has impacted Intel and other tech vendors like Hewlett-Packard and Dell, all of whom are trying to rapidly diversify their product portfolios to lessen their exposure to the PC market. Intel has been aggressive in driving down the power efficiency of its processors to get them into tablets and smartphones, while also driving other form factors—such as 2-in-1 systems that can be used as a notebook and a tablet, as well as all-in-ones and convertibles—in hopes of slowing the decline in the PC market.
The company in the fourth quarter saw its PC business stabilize a bit, with revenues staying flat when compared with the same period in 2012 and throughout all of 2013. Revenues grew 2.6 percent over the third quarter.
CEO Brian Krzanich, in a conference call with analysts and journalists, pointed to a couple of factors, including the migration of businesses off of Windows XP—which Microsoft will no longer support starting next quarter—and onto Windows 7 and 8. However, it was the new form factors that really helped the PC Client Group, he said, adding that Intel's new Core "Haswell" chips and low-power Atom systems-on-a-chip (SoCs) will help drive more system designs into the market this year, and will help Intel grow its share of the tablet market.
"That really … has to do with a lot of great form factors that are coming in the all-in-ones, the great innovation that's coming in there," Krzanich said.
The company is expanding rapidly into such areas as the Internet of things and wearable computing devices.
However, the company's enterprise business continued to struggle. The first half of 2013 was particularly rough on the business, though the third quarter was stronger and Intel executives expected the momentum to continue into Q4. However, business in the enterprise was weaker than expected, with revenues growing 8 percent and shipment only climbing 1 percent. Krzanich placed part of the blame on Congress and its harmful budget battles.
Other than the enterprise business, the Data Center Group saw revenues grow 8 percent for the quarter and 7 percent for 2013. Cloud computing revenues jumped 35 percent, storage 24 percent and high-performance computing (HPC) 18 percent.