Report Predicts Layoffs at Intel

Intel may cut a significant portion of its work force following the completion of a broad business review, one analyst says.

The chip maker could reduce its employee roster of about 100,000 by between 10,000 and 15,000, according to a July 13 report published by analyst Doug Freedman of American Technology Research in San Francisco.

The move would cap a broad company review—which Intel CEO Paul Otellini promised would leave no stone unturned—and subsequent restructuring designed to allow the company to emerge as a more nimble player in the PC business.

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“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 workforce 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 the report.

An Intel representative didnt immediately return a request for comment by eWEEK.

The review, which began in April 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. The 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.

It may lead to other changes, as Otellini told analysts on April 27 that the review would take a hard look at the companys business including the possibility for restructuring, selling or shuttering some areas, particularly those that lose money.

One likely result from a layoff, Freedman wrote, would be Intel using the cost savings to reinvest in research and development of products for PCs, its core business.

There, the company has promised to accelerate new product introductions. It pulled the release dates of its Core 2 Duo and Xeon 5100 processors forward to early in the second half of 2006.

But, in the future, it 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 believes it can rapidly drive up its chip performance, while continuing to hold the line on power consumption.

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 that 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 July 19. As part of those discussions, it has been expected to offer an update on the business review.

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