The company began informing those managers affected by the cuts on July 13.
The move comes as Intel, which has been under pressure from rival Advanced Micro Devices of late, has progressed through about two months of a broad-based internal review of its business thats designed to make it a more nimble player in the PC market.
The review will leave no stone unturned, Otellini has pledged.
"This is one of the first actions of the efficiency project that [Intel CEO] Paul [Otellini] talked about at the financial analyst meeting in April, " said Bill Kircos, a spokesperson for Intel, headquartered in Santa Clara, Calif. "That process continues. This is just one step."
The company aims for the cuts to flatten out its management structure and improve communications and decision-making capabilities, as well as save on costs, Kircos indicated.
But the current set of layoffs may not spell the end of job reductions. The chip maker could reduce its overall employee roster of about 100,000 by as many as 10,000 to 15,000 workers, according to a July 13 report published by analyst Doug Freedman, of American Technology Research, in San Francisco.
"We have learned that Intel may be calling a press conference later today [July 13] to announce the results of the companys top-to-bottom review. We believe investors are looking for work force reductions in the range of 10,000 to 15,000, as the company streamlines research and development with a PC-centric focus," Freedman wrote in his report.
Kircos declined to comment on the report.
The review, announced on April 27 following a lackluster first-quarter financial performance by Intel, has already inspired several changes by the chip maker. For one, it has arrived at a deal to sell its XScale application processor line to Marvell Technology Group for $600 million. That agreement, announced on June 27, will involve the transfer of most of the 1,400 employees who work on the product to Marvell as well.
Other changes may be in store, as Otellini told analysts on April 27 that the review would take a hard look at the companys business and consider the possibility of restructuring, selling or shuttering some areas, particularly those that lose money.
One likely result of a layoff, Freedman wrote, would be Intel using the cost savings to reinvest in R&D of products for PCs, its core business.
There, the company has promised to accelerate new product introductions. It has moved the release dates of its Core 2 Duo and Xeon 5100 processors forward to early in the second half of 2006.
In the future, Intel aims to speed up even more by moving much more quickly between processor architectures or redesigns of the circuitry that underpins its PC and sever chips. By adopting new architectures—themselves simplified to allow more elements to be reused—every two years, Intel said it believes it can rapidly drive up its chip performance, while continuing to keep power consumption under control.
Intels review may have a long tail, however. The companys efforts to restructure, and particularly to divest businesses, if it should do so, could take time.
Intel has already reorganized its Intel Flash Memory Group by giving control of NOR flash memory manufacturing and other related functions to the group. But other moves could take longer. A report by the San Jose Mercury News, which accurately predicted that sale, said the chip maker was also shopping its XScale-based IXP network processor line to prospective buyers.
The IXP line offers several chips for devices such as network routers and security appliances.
Intel reports its second-quarter earnings on July 19. At that time, its executives are expected to shed some more light on the results of its ongoing review.