SAN JOSE, Calif. Embattled Intel Corp. on Tuesday (Sept. 5) outlined anticipated cost-cutting measures, including plans to cut 10,500 jobs through layoffs and attrition.
In addition, Intel (Santa Clara, Calif.) said it expects to achieve a "capital expenditure avoidance" savings of $1 billion through more efficient utilization of manufacturing equipment and space. This is the third time Intel has cut its capital spending.
Although Intel did not elaborate on capital expenditure cuts, the company said it expects to generate savings in costs and operating expenses of approximately $2 billion in 2007. In 2008 the company expects savings from this restructuring to grow to approximately $3 billion annually.
The savings are a combination of non-workforce related steps and a significant reduction in Intel's workforce. The company's headcount is projected to decline to approximately 95,000 by the end of this year, resulting from workforce reductions, attrition and previously announced actions, according to Intel.
Its workforce will decline to approximately 92,000 by the middle of 2007 10,500 fewer than the company's employee population at the end of the second quarter of 2006. In addition to the savings from the workforce reduction, the company expects savings in merchandising expenses capital and materials.
Most job reductions this year will occur in management, marketing and information technology functions, reductions related to the previously announced sale of businesses, and attrition.
In 2007, the reductions will be more broadly based as Intel improves labor efficiency in manufacturing, improves equipment utilization, eliminates organizational redundancies, and improves product design methods and processes. 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.
In 2008, the company expects the cost and operating expense savings to grow to approximately $3 billion as it achieves the full-year run rate on the projects implemented in 2007.
The company also said severance costs would total approximately $200 million, offsetting some of the expected savings from the cuts.
"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 Paul Otellini, Intel president and chief executive, in a statement.
Intel is currently in its quiet period, so an update to its business outlook was not announced. Intel is scheduled to release third quarter results on Oct. 17.