Register Hardware

Original URL: http://www.reghardware.co.uk/2006/07/13/intel_manager_fire/

Intel sends 1,000 managers packing

By Ashlee Vance in Mountain View (ashlee.vance@theregister.co.uk)
Published Thursday 13th July 2006 18:32 GMT

Intel's cosmetic surgery continued today, as the vendor performed pink sliposuction on its managerial ranks. Close to 1,000 managers will be fired later this week in a cost-cutting move for the chip giant. Word of the layoffs leaked to the press courtesy of an internal memo penned by Intel CEO Paul Otellini.

"Only managers, ranging from senior to first-line, are affected," Otellini wrote in the memo titled 'An important and difficult step' obtained by The Register. "This step is important because it addresses a key problem we've found in our efficiency analysis slow and ineffective decision-making, resulting, in part, from too many management layers.

"It is difficult because the managers who will leave the company are our colleagues and friends, and since we have limited internal job opportunities, redeploying their skills is not a viable option."

The layoffs follow Intel's recent decision to sell off (http://www.reghardware.co.uk/2006/06/27/intel_sells_xscale/) its XScale processor business to Marvell for $600m.

Both moves are meant to realign Intel's cost-structure to better fit the current competitive environment. In the past two years, AMD has gained serious ground on Intel in the server and desktop processor markets, eroding Intel's share in these segments. The end result has been slumping sales at Intel and the realization that the company will likely have to adjust to holding around 70 per cent of the x86 processor market rather than its traditional 80 to 90 per cent share.

Intel has also had to throw money at research and development efforts meant to help it catch up to AMD. The company scrapped some processors, delayed others and brought other projects forward. All of this reworking has impacted Intel's bottom line.

"This manager reduction is one of the first major actions coming out of our structure and efficiency project, and I believe it's an essential first step toward making us more competitive," Otellini wrote. "Over the last five years at Intel, the number of managers has grown faster than our overall employee population. Our efficiency analysis and industry benchmarking have shown that we have too many management layers, top to bottom, to be effective."

American Technology Research analyst Doug Freedman issued a note today, saying that investors are looking for much more drastic cuts. They expect "10,000 to 15,000" staff to be let go, according to the analyst.

"We believe the stock will react more favorably to reductions towards the top end of the rumored range," he said. "Intel's workforce is in the range of 100,000 strong; the recent sale of the XScale business to Marvell will reduce Intel's head count by 1,400."

A price war between Intel and AMD isn't likely to help matters for either company. Despite enjoying a huge jump in sales, AMD earlier this month (http://www.theregister.co.uk/2006/07/07/amd_drops_q2/) noted that second quarter revenue looks to come in below expectations. ®