Intel is restructuring itself to concentrate on high-growth areas, including the IoT business. As part of this initiative, on Tuesday, the chip maker announced plans to reduce its workforce by up to 12,000 people (or about 11%) from its staff all over the world.
Big layoffs
About 107,300 staff members were employed by the tech giant as of the end of last year. Most of the employees affected by the layoff will be notified in the next 60 days, said the chip making giant. It also said that some of the layoffs will take place by mid-2017.
Intel is the largest PC chip making company. But, when it comes to emulating this success in mobile devices, the chip giant has failed. It has replaced traditional laptops and desktops, but with mobile devices, its success has not been noteworthy.
Any change to the PC business will have a massive impact on Intel’s bottom line as nearly 60% (more than half) of its sales and profits come from its chip and microprocessor business. From the job cuts and related expense reductions, the company expects to save $750 million this year and $1.4 billion by the middle of next year. In the second quarter, the chip maker will take a one-time $1.2 billion charge related to the restructuring.
Intel to focus on “growing” markets
For the last quarter, Intel reported $13.7 billion in sales, up 7% from last year. The profits were reported at $2 billion, up 3%. Over last year, the sales in microprocessor and chip division rose 2% to $7.5 billion. Sales dipped 14% from last quarter. About 22% growth to $651 million was reported by the Internet of Things Group, while the Data Center Group logged a 9% increase to $4 billion.
For the second quarter, the chip maker expects revenue of $13.5 billion (plus or minus $500 million) and a gross margin of around 61%. For the full year, revenue is expected to grow in the mid-single digits, compared to the previous guidance of mid- to high-single digit growth.
Also Intel is planning to invest more in the growing areas of its business, such as gaming and convertible laptop-tablet devices, among other things, the chip maker said. It added that it wants to invest in its data center business and Internet of Things (IoT) segment.
On Tuesday, Intel shares closed down 0.16% at $31.60. Year to date, the stock is down by almost 10%, while in the last year, it is down by almost 3%. In after-hours trading, the stock was down 2.37%.
