Intel is experiencing serious financial difficulties, announcing significant losses and large-scale staff cuts. The company plans restructuring and cost savings to restore its position in the market.
Intel crisis
Financial problems of the giant
Intel faced serious financial difficulties. At the end of the second quarter of 2024, the microchip manufacturer recorded a loss of $1.6 billion, which significantly exceeds the previous quarter's loss of $437 million.
Intel CEO Pat Gelsinger acknowledged that second-quarter financial results fell short of expectations despite achieving key production and technology goals. He noted that revenue growth was lower than predicted, and the company was not able to fully take advantage of promising areas such as artificial intelligence.
Cost reduction plan
To correct the current situation, Intel management is initiating a large-scale restructuring and cost optimization program. The new savings strategy calls for cost reductions of $10 billion by 2025.
As part of this plan, Intel announced the reduction of more than 15 thousand employees, which makes up approximately 15% of the total workforce of more than 125 thousand people. Thus, up to 19 thousand workers may be laid off.
Additional cost savings
In addition to workforce reductions, Intel plans to reduce R&D spending by billions of dollars annually through 2026 of the year. This will reduce capital costs by more than 20% this year. The company will also restructure to streamline work processes and review all current projects and equipment to identify inefficiencies.
Financial indicators and causes of losses
Intel's second-quarter revenue was $12.8 billion, down 1% year-over-year. It's important to note that the company's core products remain profitable. Manufacturing processors for PCs and servers continues to generate revenue. However, the bulk of the losses in the current and previous quarters came from its chip manufacturing unit, Foundry.
The company is investing heavily in the construction of new factories and the development of EUV lithography. It was this area that brought $7 billion in operating losses in 2023 and an additional $2.8 billion in the second quarter of 2024. Despite the expected receipt of up to $8.5 billion in funding from the US government as part of the CHIPS Act, this does not completely solve the company's financial problems.
Market reaction
After announcing plans to cut staff and reduce costs, Intel shares fell 20% in price, as reports the Financial Times. Earlier in April, CNBC noted that Intel shares were the worst among technology companies in the S&P 500 index this year.
Glossary
- Intel is an American corporation, the world's largest manufacturer of microprocessors
- Pat Gelsinger - CEO of Intel as of 2021
- EUV lithography - chip manufacturing technology using extreme ultraviolet radiation
- CHIPS Act - US legislation aimed at supporting domestic semiconductor production
- S&P 500 - stock index of the 500 largest US companies
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Discussion of the topic – Crisis at Intel: Mass layoffs and stock collapse by 20%
Intel is going through tough times, with a loss of $1.6 billion in the second quarter of 2024, leading to massive layoffs and a sharp drop in the company's stock price.
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Liam
What news! Intel is in such a hole. Who would have thought that a semiconductor industry giant would be in this position? 🤔 I wonder how this will affect the processor market as a whole.
Sophie
Yes, Liam, the situation is really difficult. But what worries me most is the fate of the 19 thousand employees who may be fired. These are whole families! 😢 I hope the company finds a way to minimize the negative consequences for people.
Hans
Sophie, you're right about the employees. But let's look at it from the other side - maybe this is a chance for Intel to rebuild and become more efficient? Sometimes a crisis is an opportunity for growth and innovation. 🚀
Isabella
I agree with Hans! By the way, it’s interesting what they say about AI. Maybe if Intel had more actively developed this area, the situation would have been better? 🤖 AMD and NVIDIA are doing so well in this area.
Viktor
Ha! Another giant stumbles. Intel, AMD, NVIDIA - all the same. They chase fashion trends and then are surprised at the losses. It would be better to do what they can, rather than scatter themselves. And there is no point in crying about layoffs - business is business.
Liam
Viktor, you are tough. But he’s right about something. Intel did fall a little behind in the AI race. However, their investment in new plants may pay off in the future. The question is how long they can stay afloat with such losses. 💸
Eleonore
And it seems to me that government support of $8.5 billion is an excellent chance for Intel. Yes, it’s difficult now, but with such investments they can make a breakthrough in technology. You just need to use these funds wisely. 💡
Hans
Eleonore, great point! Plus, don't forget that Intel is still the leader in many segments. Their PC and server processors are still profitable. I think if they focus on their strengths and accelerate their development in AI, they can pull through. The main thing is the right strategy! 📊