Intel Cuts 1,000 Managers

By Jessica Davis -- Electronic News, 7/14/2006

Intel Thursday disclosed to employees that it will cut 1,000 management jobs across the company as one of the first actions coming out of its efficiency review announced in April, a company spokesman has confirmed.

The cuts will be through all levels of management, all business units and all geographies. Intel did not disclose any cost savings, but said that those cost savings would already be incorporated into the earnings guidance for Q3 that Intel will release next week.

“The action is designed to reduce costs and improve decision making and communications throughout the company,” the spokesman said. “Over the last five years the number of managers has grown faster than the overall employee population. The analysis showed that there were too many layers between front line managers and senior managers”

Intel’s efficiency analysis is ongoing, and these job cuts will not be the final action, the spokesman said.  Subsequent actions are likely to come in Q3 and beyond.

Intel confirmed the job cuts after the close of the market on Thursday.  Analysts responded positively to the move.

“We view Intel's proactive restructuring at the management level constructively and believe, given Intel's announcement last month to divest its money-losing hand-held business, the company continues to successfully execute on its 90-day strategic review announced in April,” said Tim Luke, a managing director at Lehman Brothers. 

The cuts are not expected to be the last for the chipmaker.

“After discussions with management, we believe that the strategic review process should continue through into August where we expect the possibility for incremental divestitures, strategic acquisitions, and layoffs bringing the total count to at least 10,000 employees which represents roughly 10 percent of entire employee base of 103,000,” Luke said.

Affected employees in the management layoff will be notified over the next two to three working days and Intel expects the cuts to be completed by the end of the month.

At the end of Q1, Intel had 103,000 employees. However, that number is likely to be lower for the end of Q2 due to a hiring freeze. The Q2 number will be reported during the company’s earnings call next week.

Intel first announced the efficiency review at the end of April and CEO Paul Otellini promised the review would be the most extensive the company had conducted since the 1980s when it transformed itself from a memory company into a processor company.  He said that every business unit would be analyzed as part of the review.