Intel warns of sinking profits, possible layoffs

Intel executives forecast a 3 percent dip in revenue and said they will restructure the company, with the possibility of layoffs.

Intel expects a 3 percent drop in revenue for 2006 and plans a reorganization that could include layoffs over the next 90 days, Chief Executive Officer Paul Otellini said Thursday.

Intel profits will drop from US$12.1 billion in 2005 to US$9.3 billion in 2006, Otellini predicted, speaking at the company's Spring Analyst Meeting in New York. In response, Intel will cut spending this year by US$1 billion, cut capital expenditures by US$300 million and begin a 90-day structural reorganization of "nonperforming business units."

"We are going to restructure, repurpose and resize Intel for the future," Otellini said. He did not cite any numbers for potential layoffs of the company's 100,000 employees, but he said the changes would come soon.

"It would be too simplistic to simply do a reduction in force. Our analysis will be completed within 90 days, but we will not wait that long to take action. This will be a full structural reorganization," he said.

The disappointing financial numbers result from a slump in the growth rate of PC sales from 12 percent or 13 percent in recent years to 8 percent or 9 percent in 2006, excess inventory of microprocessors at retailers and a loss of market share.

Otellini did not mention names, but Advanced Micro Devices (AMD) gained market share in the first quarter of 2006, according to its earnings report.

Intel's revenue forecast is a sharp change from strong growth in recent years, which included 13.5 percent annual increases from US$30.1 billion in 2003 to US$34.2 billion in 2004 and US$38.8 billion in 2005. Intel will count net revenue in 2006 of US$37.7 billion, Otellini said.

In profit terms, that will cause a sudden slump. Intel earned US$7.5 billion in 2003, US$10.1 billion in 2004, and US$12.1 billion in 2005. Profit will fall to US$9.3 billion in 2006, Otellini said.

In addition to the pending reorganization, Intel will try to regain market share by launching three dual-core, 65-nanometer processors in coming months.

"There has been a lot of anxiety over our market segment share. When you look at a slope of the graph, it's not terribly pretty," Otellini said.

So Intel will launch its Woodcrest chip for servers in June, its Conroe chip for desktops in July and its Merom chip for mobile PCs in August. Together, they will help recapture part of the lost business, but Intel lost market share in three segments of the market over the first quarter of 2006, said Anand Chandrasekher, the company's senior vice president and general manager for sales and marketing.

Intel lost market share in channel and consumer retail areas for planning reasons; it did not build enough chipsets in the second half of 2005, he said.

Intel lost market share in servers for competitive reasons: "We did not meet the needs of the marketplace or our competitor had a better product than we did," Chandrasekher said.

Join the newsletter!

Or
Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Ben Ames

IDG News Service
Show Comments

Essentials

James Cook University - Master of Data Science Online Course

Learn more >

Mobile

Exec

Budget

Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?