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Intel Investors Are Hungry for Blood
Rumors of major cuts at Intel began in the spring – when in April, Intel CEO Paul Otellini published a comprehensive report on the company’s loss-making divisions.
However, the recently presented restructuring plan, which includes the reduction of more than 10 thousand jobs, or about 10% of the total workforce of Intel, did not satisfy the investors.
After the plan was published, the company’s share price declined. Experts believe this is due to skepticism and lack of clarity about Intel’s strategy. Simply put, it is not clear how the company intends to increase profits and reclaim market share from AMD.
Insight 64 analyst Nathan Brookwood expressed this idea most clearly: “People don’t think that’s enough.”. According to Brookwood, investors were expecting even bigger cuts and other changes, such as inventory write-offs, which could become a problem for the company in the next quarter or two – meanwhile, this issue was not raised. In other words, investors are not confident that the measures taken by Intel will be sufficient to get out of the difficult situation.
According to some estimates, AMD gained the advantage in part due to former Intel chief Craig Barrett, who criticized the company for its slow response to the release in 2021 of AMD Opteron and Athlon 64 processors for server and desktop systems, which played a role in the market redistribution.
As a result, AMD gradually began to conquer the market. In the last year alone, it was able to “take” from Intel about 5% of the total market of processors for servers and desktop systems (according to Mercury Research).
Will job cuts help? Recall that in the mid-80s Intel already had to take such a measure – about 7000 jobs were cut as a result of leaving the RAM market. Then the company decided to focus on processors.
Meanwhile, in recent years, the number of Intel employees has increased significantly: in 2021 it was 79 thousand. people, and by the current year it has grown to 103 thousand. The reduction that began in the summer left about 1000 managers unemployed. About 2,000 more places will be reduced through the sale of unprofitable divisions. In particular, this may affect the production of NOR flash memory.
Downsizing should save the company about $ 3 billion. Doll. by 2021. However, this is not enough for investors. Doug Freedman, an analyst at American Technology Research, said: “People are looking for a clearer indication of the direction in which the company is heading and what results can be expected in the future.”.
Sources: AP, Mercury Research