Intel Corporation (NASDAQ:INTC) reported weaker than expected fourth quarter results last week, and projected flat revenue for 2014. Gloomy financial prospects prompted the company to announce job cuts. The Santa Clara-based chipmaker said Friday that it will reduce its workforce by 5% this year. Intel Corporation (NASDAQ:INTC) ended 2013 with 107,200 employees, indicating that the job cut would affect close to 5,400 employees.

Intel Corporation

Intel’s head count reduction won’t really be layoff

However, an Intel Corporation (NASDAQ:INTC) spokesperson said that the workforce reduction won’t really be a layoff because the cuts would come through other means such as early retirement offers, attrition and buyouts. The company estimates its revenue to remain flat this year, compared to Wall Street estimates of 1.2% growth. So, earnings are unlikely to grow without heavy cost cutting as demand for PC chips continues to decline. Over the past two years, Intel Corporation (NASDAQ:INTC)’s annual earnings have declined from $12.9 billion in 2011 to $9.6 billion in 2013.

Intel Corporation (NASDAQ:INTC)’s head count has been rising consistently after its former CEO Paul Otellini ordered a restructuring plan in 2006. But its new chief Brian Krzanich has changed priorities. Krzanich has started targeting smartphones, tablets and wearable devices. On Thursday, Intel Corporation (NASDAQ:INTC) posted a net profit of 51 cents a share or $2.63 billion in Q4, compared to 48 cents or $2.47 billion in the same period a year ago. Revenues inched up from $13.48 billion to $13.83 billion. Analysts polled by Thomson Reuters were expecting $13.7 billion in revenues and 52 cents a share in earnings.

Intel has $20 billion in cash

Raymond James analysts Hans Mosesmann and Brian Peterson said in a research note to investors that the company showed positive signs on a number of fronts, but failed to justify the recent rally in the stock. The upside in revenue was driven by, seasonal demand for PCs as Windows XP is scheduled to retire in April. Intel Corporation (NASDAQ:INTC)’s cash and cash equivalents rose 5% QoQ to $20.1 billion. Its $6.2 billion in operating cash flow was strongest since 2010. Anyway, Q4 is usually strong in terms of operating cash flow due to the decline in working capital. Raymond James has an Underperform rating on the stock.

Intel Corporation (NASDAQ:INTC) shares closed Friday at $25.85, down 2.60% for the day. In May 2012, the stock reached a 5-year peak of $29.27, but it has declined 12% since then. In contrast, the S&P 500 index has gained 31% in the same period.