Intel Announces Elimination of 10,500 Jobs in Restructuring Effort

SAN JOSE, Calif. – Chip-maker Intel Corp. (INTC) said Tuesday it will eliminate 10,500 jobs — about 10 percent of its work force — through layoffs, attrition and the sale of underperforming business groups as part of a massive restructuring.

The Santa Clara-based company said most of the job cuts this year will come from its management, marketing and information technology ranks, and will expand next year to include manufacturing, design and other segments.

The cuts are expected to save the company $3 billion per year by 2008. Severance costs are expected to total $200 million.

"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," Chief Executive Paul Otellini said in a statement.

The world's largest chip maker is fighting to reverse sinking profits and regain market share stolen by smaller rival Advanced Micro Devices Inc. (AMD).

Intel has been under intense pressure to unload money-losing divisions and halt the encroachment of AMD on its lucrative core business making the microprocessors that act as the brains of computers.

Intel has been steadily losing profits and market share. Analysts have criticized it for reacting too slowly after AMD's 2003 launch of the critically acclaimed Opteron and Athlon 64 chips for servers and desktop PCs.

Before the announcement, shares of Intel rose 11 cents to close at $19.99 Tuesday on the Nasdaq Stock Market. In after-hours trading, shares fell 16 cents to $19.83.

Speculation about massive job cuts has been rampant since Otellini announced in April the company was planning a broad overhaul targeting money-losing business groups in every aspect of its operations.

Intel, which had about 103,000 employees worldwide at the time, vowed to cut $1 billion in spending. It also launched the review of its business units.

Otellini said the restructuring will be as expansive as the company's transformation in the mid-1980s, when it exited a business it helped create — making dynamic random access memory chips widely used to store information in computers — to focus on microprocessors.

That shift prompted one of Intel's largest rounds of layoffs ever, with the company eliminating more than 7,000 jobs, about 30 percent of its work force at the time.

Since then, Intel has avoided large-scale layoffs. But the dot-com crash did prompt the elimination of about 11,000 jobs — largely through attrition and buyouts — in less than two years. Head count was reduced to about 79,000 in 2002.