Intel restructuring to cost 12,000 their jobs

Intel Corp. says it will restructure its operations to focus more on products for the data center and Internet of Things (IoT) and less on the now struggling PC market where it first made its mark. The move is expected to result in the loss of 12,000 jobs, approximately 11% of the company's workforce, by the middle of 2017.

Intel expects the reductions to accrue through a combination of site consolidations worldwide, "voluntary and involuntary departures," and a re-evaluation of programs. Company executives say they will inform the majority of the affected employees of their impending fates within the next 60 days. More than half of the job reductions should take place by the end of this year, according to CFO Stacy Smith.

Intel believes the restructuring will result in savings of $750 million this year and annual run rate savings of $1.4 billion by the middle of next year. The company says it will take a one-time charge of approximately $1.2 billion in the second quarter of this year related to the restructuring.

The move comes as Intel's products for data center and IoT, including memory chips and now FPGAs via its acquisition of Altera (see "Intel agrees to buy Altera for $16.7 billion"), sparked $2.2 billion in revenue growth last year. They composed 40% of the company's revenue and most of Intel's operating profit. The PC business, meanwhile, continued to shrink. The total addressable market (TAM) for PC products from 2013 to 2015 declined 10%, Smith told attendees of an analyst call to discuss first quarter results.

Therefore, the company says it will focus investments going forward on its data center, IoT, memory, and connectivity operations, as well as such growing segments in its Client business as "2-in-1s," gaming, and home gateways.

"Our results over the last year demonstrate a strategy that is working and a solid foundation for growth," said Intel CEO Brian Krzanich. "The opportunity now is to accelerate this momentum and build on our strengths. "These actions drive long-term change to further establish Intel as the leader for the smart, connected world," he added. "I am confident that we'll emerge as a more productive company with broader reach and sharper execution."

The company also announced that CFO Smith will transition to a new role in the company that will see him lead sales, manufacturing, and operations. A new CFO has yet to be hired.

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