Announces restructuring to speed its transition to a cloud and connected computing business
Intel has announced a restructuring initiative to accelerate its evolution from a PC company to one that powers the cloud and smart, connected computing devices, on the back of weaker growth in the PC market, in which the company has been a dominant player.
These changes will result in the reduction of up to 12,000 positions globally, approximately 11% of employees, by mid 2017 through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programmes. The majority of these actions will be communicated to affected employees over the next 60 days with some actions spanning in to 2017.
Intel expects the programme to deliver $750 million in savings this year and annual run rate savings of $1.4 billion by mid 2017. The company will record a one-time charge of approximately $1.2 billion in the second quarter.
Worldwide PC shipments totalled 60.6 million units in the first quarter of 2016, a year on year decline of 11.5%, according to IDC Worldwide Quarterly PC Tracker. Instead, the data centre and Internet of Things (IoT) businesses are Intel’s primary growth engines, with memory and field programmable gate arrays (FPGAs) accelerating these opportunities. These growth businesses delivered $2.2 billion in revenue growth last year, and made up 40% of revenue and the majority of operating profit, which largely offset the decline in the PC market segment.
The restructuring initiative was outlined in an email from Intel CEO Brian Krzanich to Intel employees. “Our results over the last year demonstrate a strategy that is working and a solid foundation for growth,” said Krzanich. “The opportunity now is to accelerate this momentum and build on our strengths.
“These actions drive long term change to further establish Intel as the leader for the smart, connected world,” he added. “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.”
While making the company more efficient, Intel plans to increase investments in the products and technologies that that will fuel revenue growth, and drive more profitable mobile and PC businesses. Through this comprehensive initiative, the company plans to increase investments in its data centre, IoT, memory and connectivity businesses, as well as growing client segments such as 2-in-1s, gaming and home gateways.