Intel has announced significant restructuring which will involve cutting 10 500 jobs by mid 2007. The company says the cuts along with savings in merchandising expenses, capital and material expenses will save it $3 billion a year by 2008.
The company said it will 7500 jobs by the end of this year decreasing its workforce population to approximately 95 000. Most of the job reductions will occur in management, marketing and information technology functions, reductions related to the previously announced sale of businesses, and attrition. Intel said it will cut a further 3000 jobs by mid 2007 with resulting cost savings of $2 billion in 2007 and $3 billion in 2008. In 2007, Intel says the job reductions will “be more broadly based.”
“These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come,” said Intel President and CEO, Paul Otellini.
In addition, Intel expects to achieve a capital expenditure avoidance of $1 billion by better utilizing manufacturing equipment and space. The company expects that approximately 25 percent of the project’s savings in 2007 will reduce cost of sales, and the rest will reduce operating expenses.
The company expects severance costs to total approximately $200 million, offsetting some of the expected savings from the project’s implementation.
Intel said in a statement that it is currently in its “quiet period”, so an update to its business outlook will not be made at this time. Further information concerning savings and costs related to the restructuring project will be provided in quarterly earnings releases and related business outlook estimates. The earnings release for the third quarter of this year is scheduled for publication Oct. 17.