SANTA CLARA, Calif. -- Amid a major slowdown in its chip sales, Intel Corp. today announced it expects to reduce its workforce by about 4.8%, or 4,000 employees, primarily through attrition, voluntary separation programs and some "targeted business disinvestments."
The workforce reductions, to take place in the second half of 2002, follow lackluster results for the second quarter. Today, Intel reported second-quarter revenue of $6.3 billion, down 7% sequentially and approximately flat year-over-year. Second-quarter net income was $446 million, down 52% sequentially and up 128% year-over-year. Earnings per share were $0.07, down 50% sequentially and up 133% from $0.03 in the second quarter of 2001.
Intel missed Wall Street's projections. Analysts surveyed by First Call had predicted earnings of 10 cents to 12 cents a share in the just-completed quarter.
Last month, Intel said it expects second-quarter revenue to be between $6.2 billion and $6.5 billion, compared to the previous range of $6.4 billion to $7.0 billion (see June 6 story ).
And as expected, Intel cut its capital spending for 2002--an ominous sign for the company and chip-equipment makers (see July 15 story ).
Intel said its capital spending for 2002 is expected to be between $5.0-to-$5.2 billion, lower than the previous expectation of $5.5 billion, primarily due to non-fab-related spending reductions, with no change in the company's current and future microprocessor capacity plans. At the same time, the company cut its 2002 R&D budget from $4.1 billion to $4 billion.
Meanwhile, Intel's results include a $106-million charge to cost of sales related to the decision to wind down Intel Online Services, along with a $112-million write-off of acquired intangibles, primarily related to Xircom PC cards for wireline networking.
Acquisition-related costs during the quarter consisted of $14 million in one-time charges for purchased in-process research and development, and $229 million in amortization of acquisition-related intangibles, write-off of intangibles and other costs.
"In a tough environment, we continued to execute well," said Craig R. Barrett, Intel chief executive officer, in a statement. "Our investments in technology and manufacturing are delivering processors with clear performance leadership, resulting in market segment share gains across the board. We also saw growth in our communications businesses, led by solid flash memory revenue and share growth.
"Although an overall industry recovery has been slow to materialize, we still expect a modest seasonal increase in demand in the second half," Barrett continued. "In this environment, our strategy remains the same: Focus on execution, take prudent cost cutting measures, and invest to further improve our competitive position and long-term growth prospects."
Recently, Intel blamed the problems due to softer than expected demand in Europe. Microprocessor units were at the low end of the normal seasonal pattern, with a weaker than expected mix.
Going forward, Intel's prospects look dim. Revenue in the third quarter is expected to be between $6.3-to-$6.9 billion.
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