Intel Corp., the world's biggest maker of microchips, is expected to announce major job cuts on Tuesday as part of a plan to trim $1 billion in costs and regain its competitive edge, analysts and media reports said.
With profits plummeting and rival Advanced Micro Devices Inc. steadily gaining market share, analysts have said Intel needs to cut between 9,000 and 15,000 people from its 100,000-strong global payroll.
A reduction of that size would be the largest in Silicon Valley since Sun Microsystems, a maker of server computers, said in May it would sack up to 5,000 workers.
The opportunities for cost reduction reside more in flash memory and non-core businesses. Intel has too many poorly focused science projects for a company with so many competitive problems. Merrill Lynch analyst Joe Osha said in a note.
The areas that Intel will likely seek to address with cost cutting aren't the core microprocessor businesses, he wrote, adding: We also think that Intel has very limited ability to cut either product development or marketing costs without imperiling the business recovery the company hopes to achieve.
Talk of a big work force reduction gathered steam last week with media reports saying that Intel planned to make an internal announcement on Tuesday.
The Santa Clara, California-based chip maker recently completed a three-month, top-to-bottom review of its operations that has already seen it fire 1,000 managers and sell off two unprofitable business units.
On Monday, a Malaysian newspaper said Intel would offer voluntary layoffs to up to 2,000 workers in that country, where the company has employed 10,000 people for assembly, packaging and testing.
Intel shares fell 13 cents, or 0.65 percent, to $19.75 in early trading on the Nasdaq, whereas AMD was up 91 cents, or 3.65 percent, at $25.56. Intel's share price has fallen about 20 percent in the year to date, against a 19 percent drop in
Osha, who has a buy rating on Intel, said that without the earnings drag from flash memory and science projects, Intel could earn $1.37 per share in 2007 on revenue of $36.2 billion. That compared to his current estimate of $1.22 earnings per share on $39.4 billion in revenue.