By Andrew Khoury,
Money & Investing Writer
On Friday, January 17, Intel (NASDAQ: INTC) announced its plan to reduce its workforce around the world by over 5,000 people in 2014. The cuts, according to the computer chip making company, are due to “evolving marketing trends.”
Intel plans to cut 5 percent of its global workforce, approximately 5,380 jobs, by the end of the year. These cuts can also be attributed to less demand for personal computer chips as well as an effort by the company to boost earnings since its reported profits and revenues have fallen for the second straight year.
Intel has dominated chip making for the PC industry, but with less people using PC’s and more people using smartphones, laptops, and tablets, PC sales worldwide have declined for the past seven quarters, thus showing that Intel has lost its competitive advantage to rivals such as Qualcomm Inc. (NASDAQ: QCOM) and Samsung Electronics Co, who do make chips and processors for smartphones and tablets.
Intel is not alone in reducing its workforce since Apple (NASDAQ: AAPL) introduced the iPad, and tablet technology, in 2010. Hewlett-Packard Co (NYSE: HPQ) is in the middle of an internal restructuring that is expected to see it cut around 34,000 jobs by the end of the year.
Dell managed to take themselves out of the public markets so that the company could restructure without public, mostly Wall Street, ridicule.
The Santa Clara based company does not plan to lay off any of the workers expected to lose their jobs this year. Instead, the company will reduce its workforce through attrition, redeployments, buyouts, and early retirement offers.
Last September, Intel said it would close an old factory in Massachusetts, thus eliminating around 700 jobs.
The company also has kept a factory, which was expected to start producing Intel’s most advanced chips in 2013, in Arizona closed until the other factories on-site are upgraded.
“This is not a layoff,” said Intel Spokesman Chris Kraeuter. “It’s not a giant, one time action. This is a target employment rate for the end of the year.”
Intel is forecasting its revenue this year to be around the same as in 2014, therefore making the only way to increase profits by cutting costs.
CFO Stacy Smith has alluded to this reduction, and said that Intel would increase its investments in other growing, more promising areas such as data center technology, low-power chips, and tablets.
The chipmaker said that it has plans to quadruple its tablet chip volume to 40 million units and aggressively stake out market share in mobile chip launches.
“If they’ve got a bunch of resources in a market that may not be dead but is not growing a ton, it probably makes sense to reprioritize those investments in areas where there are fast-growing markets,” said Bernstein analyst Stacy Rasgon.
A version of this article appeared in the Tuesday, Jan. 28 print edition.
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