SANTA CLARA, Calif. -- Intel Corp. today (Feb. 20) told employees that it is delaying pay raises for salaried workers and senior managers, cutting some travel and discretionary spending, and letting job openings go unfilled to reduce expenses in 2001.

Intel's CEO, Craig Barrett, announced these "cost saving" measures and others moves in an e-mail to employees today. The memo described a series of actions aimed at saving "hundreds of millions of dollars," said a corporate spokesman in a phone interview. "This will not impact our first-quarter guidance. We are also still planning to spend $4.3 billion on R&D and $7.5 billion on capital expenditures this year."

The belt tightening is aimed at ensuring that Intel will be able to spend money on strategic programs, such as new wafer fabs and process development. "We want to make sure these funds are available, and this is a response to the current business environment," the spokesman added, referring to the slowdown in chip sales worldwide.

With semiconductor sales slumping in PC and other segments, Intel has decided to reduce its workforce through attrition. The Santa Clara company said it will only fill essential technical and engineering jobs with outside hires. Intel's attrition rate is on average less than 10% a year, said the company spokesman. Currently, the Santa Clara chip giant employs 87,000 workers.

Intel has also announced it is deferring annual merit pay raises, which were scheduled to become effective in April. Senior management raises are being postponed until October. One half of the pay raise for all other salaried employees will be deferred until October. Intel plans to evaluate business conditions in the September-October timeframe before deciding whether or not to issue pay raises in the fall, said the company spokesman.

The world's largest chip supplier also said it was delaying its "Free PC" program for salaried employees who have not yet received home computer systems from the company under a previously announced program. "About 25-to-30% of Intel's workers worldwide outside the U.S. have received their systems and some have in the U.S. The rest of the PCs will be put on hold until 2002 for salaried employees. Hourly workers will still have the option to receive their PCs this year or receive computers later," the spokesman said.

Intel is also cutting discretionary spending, such as overtime pay, travel expenses, relocation costs, and the use of outside consultants, according to the e-mail from Barrett.

Last month, Intel downgraded its outlook for the first quarter of 2001. The company today said it was still expecting a 15% decline in revenues in the current quarter from $8.7 billion in Q4 of 2001 due to seasonal factors and a slowdown in economic growth. The company is also expecting its gross margin to drop to 58% in the current quarter compared to 63% in the previous three-month period due to lower revenues.

While releasing its Q4 results, Intel announced it would close a printed-circuit board plant in Puerto Rico by middle of this year, eliminating 1,360 jobs. During a conference call with analysts, Intel executives also said the company had begun to hold back in hiring, but today's announcement expanded the "hiring freeze."

"These cost-saving moves are on top of what was announced last month," said the Intel spokesman.