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The disruption occurring around Intel over the past several months looks like it could continue as the giant chip maker reportedly is planning to make significant job cuts.
The Oregonian newspaper, citing multiple unnamed sources within the company, said the layoffs will be larger than the 1,100 U.S. jobs lost last year and could hit double-digit percentages in some business units. The downsizing could begin soon after company executives announce first-quarter financial numbers April 19, though the timing and specifics of the plans are still uncertain, the sources said.
Intel had more than 107,000 employees at the end of 2015.
Job cuts would add to the upheaval that has hit Intel as executives look to reorganize the company and expand into new growth areas while also dealing with the continued contraction in the global PC market and trying to gain traction in a competitive mobile chip space that is dominated by ARM-based chips from such vendors as Qualcomm and Samsung.
In addition to the job losses, Intel executives also reportedly may consolidate operations and close smaller facilities following acquisitions the company has made in recent years, including the $16.7 billion acquisition of Altera, which makes programmable chips called field-programmable gate arrays (FPGAs).
Over the past year, the company has seen defections in its executive ranks and has been forced to change the cadence of its processor production cycle due to the increased complexity and costs involved in continuing to shrink the chips. President Renee James left last year, and more recently, the hiring of former Qualcomm executive Venkata “Murthy” Renduchintala in November 2015 to oversee such businesses as PCs, mobile and the Internet of things (IoT) has roiled the leadership ranks at the company, fueling the departure of several veteran Intel executives.
Renduchintala earlier this month reportedly sent a memo to senior Intel managers telling them that he wants the company to speed up product development and be more responsive to customers, and that he’s making changes to ensure this happens.
Add in the 50th anniversary of Moore’s Law and the recent death of former CEO Andy Grove, and it becomes clear that Intel is a company in transition and one that is continuing to deal with a lot of change, according to Charles King, principal analyst with Pund-IT.
“Intel has come off a couple of interesting events the past few years,” King told eWEEK.
The job cuts would continue that trend. The layoffs and more recent executive changes are coming after Intel generated $55.4 billion in revenue in 2015—a 1 percent drop from 2014—and $11.4 billion in income, a 2 percent decline. A deeper look at the numbers shows how things are changing for the company. Intel saw strong growth in several business units, such as the Data Center Group—which grew revenue 11 percent—and smaller but growing businesses like IoT and nonvolatile memory.
At the same time, the struggles with the declining global PC market continue to impact Intel’s bottom line, and the company has yet to gain much traction in the mobile space.
Still, Intel is continuing to push its architecture in these areas. At the recent Intel Developer Forum (IDF) in Shenzhen, China, company officials announced its Apollo Lake portfolio of Atom-based systems-on-a-chip (SoCs) that will include a new x86 microarchitecture and improved graphics capabilities and be aimed at such systems as mini-PCs, convertible and two-in-one systems, notebooks, all-in-one PCs and tablets.
Intel Reportedly Preparing for Significant Job Cuts
Meanwhile, CEO Brian Krzanich is pushing to reposition the company to take advantage of emerging growth areas, such as wearable devices, the IoT and the cloud, and has hired Renduchintala to oversee an array of businesses, including PCs, mobile and the IoT. His hiring was unusual in that the chip maker rarely brings in top-level management from the outside, an indication that Krzanich wants to rapidly change Intel’s inner workings. Since becoming CEO in 2013, Krzanich has done his own share of shaking up the company, including through the pursuit of the new growth markets.
Bringing Renduchintala on board in November 2015 has accelerated the disruption at Intel. Renduchintala, who at Qualcomm helped lead the engineering team in charge of developing such products as the company’s Snapdragon SoCs, is now president of Intel’s new Client and Internet of Things Businesses and Systems Architecture Group. His appointment has resulted in a number of longtime Intel executives leaving the company.
Most recently, Intel announced that Kirk Skaugen, senior vice president and general manager of the Client Computing Group, which includes PCs, has left the company, and that Doug Davis, senior vice president and general manager of the IoT Group, will retire at the end of the year. In addition, Aicha Evans, corporate vice president and general manager of Intel’s Communications and Devices Group, also reportedly has left the company.
In his memo to senior management, which was obtained by The Oregonian, Renduchintala said the company needs to be more competitive.
“Over the last three months I have conducted numerous project reviews with our execution teams, and there is a clear trend that has emerged in these reviews—a lack of product/customer focus in execution that is creating schedule and competitiveness gaps in our products,” he wrote.
Renduchintala also outlined plans to fix those issues. He will create three-person teams of officials for each new product being developed, and those team members will work together until the product development is completed. At that point, the team members will return to their previous roles. According to the report, Renduchintala said he is considering going outside the company to find some of these team leaders, and that going forward the plan is to use this program as the model for developing other new offerings.
Pund-IT’s King said that Renduchintala “was known for being a no-nonsense, very plain-spoken executive during his time at Qualcomm,” and the fact that he was hired from outside Intel to assume such a high-level position was an indication that “the company’s board and Brian Krzanich wanted to shake things up a bit.”
The resulting turmoil is not necessarily a bad thing, particularly in some parts of the business, according to Patrick Moorhead, principal analyst with Moor Insights and Strategy.
“Intel needs something new to bring to the table on mobile silicon for smartphones and consumer tablets,” Moorhead wrote in an email to eWEEK. “The company is investing billions with little financially to show for it, so a shakeup is probably a good thing for the company in those areas.”