Intel Will Slash Up To 12,000 Jobs After Q1 Sales Miss On PC Woes
No. 1 chipmaker Intel ( INTC ) lagged Wall Street’s Q1 revenue expectations late Tuesday on PC sales that grew minimally vs. the year-earlier quarter, and announced that up to 12,000 positions would be cut by mid-2017. The 12,000-cut represents 11% of Intel’s global workforce and will require “a combination of voluntary and involuntary departures and a re-evaluation of programs,” according to the press release. Most affected employees will be notified within 60 days. And CFO Stacy Smith will move to a “broader, new role within Intel” leading sales, manufacturing and operations, and reporting directly to CEO Brian Krzanich. Smith will remain in his role pending a formal CFO search, Krzanich said on Intel’s conference call with analysts, after it released results. Intel stock was down more than 2% after hours, having closed down 0.2% during the regular session. Shares are weaker by 8% for the year, having rebounded from a slide in January and mid-February amid reports of weak Taiwanese ODM sales. Krzanich detailed the restructuring in an email to employees, highlighting Intel’s stepping away from PCs to focus on high-growth segments like the data center, Internet of Things and memory which, together, brought in $2.2 billion in revenue growth in 2015. “We are evolving from a PC company to a company that powers billions of smart, connected devices,” Krzanich said on the call. “We do not take these changes lightly. We will be saying goodbye to employees who have played a great role in Intel’s success.” By restructuring, Intel plans to save $750 million in the first year, with an annual run rate savings of $1.4 billion by mid-2017, allowing Intel to “intensify” its investments in its key growth areas. Ultimately, “we expect an even more profitable client computing group (PC),” Krzanich added. PC sales comprised 55% of Intel’s Q1 sales, but have struggled in recent quarters amid stiff tablet and two-in-one competition. Q1 Sales Lag, But EPS Tops For Q1 ended April 2, Intel reported $13.7 billion in sales and 54 cents earnings per share, up 7% and 20%, respectively, vs. the year-earlier quarter. EPS topped analyst expectations by more than a nickel, but sales missed. The consensus of 45 analysts polled by Thomson Reuters modeled $13.83 billion in sales (against Intel’s non-GAAP revenue of $13.8 billion) and 48 cents EPS, in line with Intel’s earlier view for $14 billion in sales, plus or minus $500 million. Nonvolatile memory sales declined 6% vs. the year-earlier quarter, underperforming the struggling PC unit, which managed to climb 2% year over year. Intel’s high-growth units — data center and Internet of Things — grew a respective 9% and 22% year over year. Security sales popped 12% vs. the year-earlier quarter. Krzanich didn’t address recent rumors that Apple ( AAPL ) might tap Intel to supply 30 million-40 million iPhone 7 modems — a development that had sent Intel’s stock jumping. Qualcomm ( QCOM ) typically sources the iPhone modem and would retain the lion’s share of the iPhone 7, analysts say. Analysts largely doubt Intel’s mobile strategy, which hasn’t yet played out. But Krzanich, on the call, defended the mobile unit, which he said “is absolutely continuing to grow for us as a segment, and we’re increasing our profitability.” For the current quarter, Intel guided to $13 billion to $14 billion in sales, which would be up 2% at the midpoint vs. the year-earlier quarter. The company reduced its full-year guidance to mid-single-digit growth. Earlier, Intel saw mid- to high-single-digit growth. Pacific Crest and S&P Global Market Intelligence analysts had expected Intel to cut its full-year guidance on the ebbing PC market, which industry trackers IDC and Gartner recently saw dipping 11.5% and 9.6%, respectively, in Q1 shipments. Days after the forecasts emerged, rumors cropped up that Intel might be prepping to cut thousands of jobs. Image provided by Shutterstock .