Intel Sharpening The Blade For Job Cuts After Tough Quarter

With a challenging PC market on the horizon for 2015, chip manufacturing company Intel is planning to lay off an unspecified number of employees in the coming month, according to The Oregonian.

An Intel spokesman declined to comment on the news of reported layoffs.

Intel, which has about 106,000 employees globally, stated in a confidential internal memo obtained by The Oregonian that it would prioritize investments, slow down hiring and drive other efficiencies, reportedly citing plans to cut its research and administrative budget by $300 million this year.

[Related: Intel Ends The Rumor Mill, Plans To Acquire Altera To Spur Internet of Things Business]

The layoffs come as the Santa Clara, Calif.-based company faces a rough year for its Client Computing Group sales.

In April, Intel readjusted its sale guidance for 2015 to flat revenue at $55.9 billion.

Expectations of flat revenue come on the heels of a sluggish PC market. Intel CEO Brian Krzanich said during Intel's first-quarter earnings call that he expects the market to decline at a mid-single-digit rate in 2015, even with the prospect of Windows 10 shipments in the summer.

For partners, the impending layoffs are unsurprising, especially given Intel's struggles to keep up with the shift from traditional client server architecture to cloud computing architecture.

"The industry's facing a paradigm shift, and everyone in this business is feeling the effects," said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minnetonka, Minn.-based system builder. "Last year we saw a spike with the Windows XP refresh and it doesn't seem that the drive to upgrade this year will make as big of a mark. People are hopeful about Windows 10 and Skylake, but it's not surprising to me that Intel is preparing in case that doesn't happen."

Andrew Kretzer, director of sales and marketing at Bold Data Technology, a Fremont, Calif.-based system builder, agreed.

"I do not find this news surprising," he said. "In speaking with many of our hardware manufacturing partners, this appears to be one of the worst [second quarters] on record."

Despite the layoffs, partners remain bullish on Intel's investments in its strong Data Center Group, sales of which were up 19 percent in the first quarter, driven by unit growth and a richer mix of units.

"This [news] doesn't worry me at all. … I'm very happy with Intel's strategy, and the data center growth is huge for the company's future," said Jeff Dickey, chief innovation officer at Redapt, a Redmond, Wash.-based provider of data center services and Intel server processors and chip reseller. "We need to be consuming new chips that are more efficient with more capabilities. Intel's road map is continuing to deliver that."

According to The Oregonian, cuts will begin June 15 and conclude a month later.

PUBLISHED JUNE 11, 2015