SANTA CLARA, Calif. -- Citing weakness across its entire IC business, Intel Corp. here today (March 8) announced it will reduce its headcount by 5,000 jobs, or 5.7% of its workforce, in the next nine months, and it lowered its forecast again for the first quarter.
Intel said it now expects revenue to sequentially fall 25% in the first quarter from $8.7 billion in the fourth quarter of 2000.
The Santa Clara chip giant said it will trim R&D spending by $100 million to $4.2 billion in 2001 compared to a previous budget of $4.3 billion. But Intel officials said the company will not lower its record $7.5 billion capital spending plans despite the industry slump in 2001.
During a conference call with analysts after releasing the downgraded outlook, Intel executives indicated that they have no idea if or when a semiconductor recovery will take place in 2001.
Prior to today, Intel had estimated that its sales would sequentially fall 15% from $8.7 billion in the fourth quarter of 2000. The company now projects that its sales will come in at $6.5 billion in the current three-month period--a 19% decline $8.0 billion in the quarter last year.
Prior to today's announcement, Wall Street was expecting Intel to post earnings of $0.21 per share on sales of $7.4 billion in the first quarter, according to survey of analysts by First Call/Thomson Financial. In the fourth quarter of last year, Intel reported a profit of $2.2 billion a share, or $0.32 a share, on sales of $8.7 billion.
In a move to trim back costs last month, Intel announced it was freezing pay raises, cutting discretionary spending, and letting job openings go unfilled to reduce expenses in 2001 (see Feb. 20 story). Today, Intel said it was stepping up the cost-cuts. It plans to eliminate 5,000 jobs over the next nine months through attrition. Currently, the company has nearly 90,000 employees worldwide.
Two months ago, Intel announced it was closing a printed-circuit board plant in Puerto Rico to lower costs (see Jan. 16 story).
Intel is experiencing weak demand in both its PC and non-PC segments, said Sean Maloney, executive vice president and director of sales and marketing at the company, during today's conference call. In its bread-and-butter microprocessor business, Intel is still experiencing a slowdown in the x86-based desktop market, Maloney said.
"There's also a general slowdown in the server market," Maloney said. "Chip set demand, which is tied to PC demand, is weak."
On the bright side, however, the company claimed that its new Pentium 4 processor line is on plan. "Pentium 4 is generally where was expect it," he told analysts.
But the company's communications chip business is weak. "This includes flash and networking silicon," added Andy Bryant, executive vice president and chief financial officer at Intel.
During the conference call, Bryant said there is no plans to cut the company's capital expenditures for the year, which is targeted at $7.5 billion. Intel spent $6.7 billion in 2000.
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