Intel plans to make $3 billion in cost reductions in 2023 and up to $10 billion a year by the end of 2025, the company reported Thursday. All in, those reductions could total $23 billion over three years.
“We are aggressively addressing costs and driving efficiencies across the business,” CEO Pat Gelsinger said in a statement. In a call with analysts, he added: "Inclusive in our efforts will be steps to optimize our headcount. These are difficult decisions affecting our loyal Intel family but we need to balance increased investment in areas like leadership, product and capacity in Ohio and Germany with efficiency measures elsewhere as we drive to have best-in-class structures."
Some reports have suggested Intel might cut as much as 20% of its workforce, now at 114,000 employees, but layoffs were not mentioned explicitly in Intel's earnings press release or slide deck.
Revenues for third quarter were down 20% year-over-year, hitting $15.3 billion, with earnings at 25 cents per share. The company is now advising full 2022 revenues will reach as much as $64 billion, well below prior years.Revenues in 2021 hit $79 billion, a record, which was 1% above 2020's total.
Net income for the quarter reached $1 billion, down 85% from $6.8 billion recorded a year earlier.
Intel lost ground in the client computing and data center and AI categories, a pattern noticed by other chipmakers who have seen declines in PC demand and for chips used in servers.
Intel’s Client Computing Group dropped 17% over a year earlier to $8.1 billion and its Datacenter and AI Group dropped 27% to $4.2 billion. Network and Edge was up 14% to $2.3 billion, while accelerated computing and graphics improved 8% to $185 million. Mobileye, which went public on Wednesday, created $450 million in revenues in the third quarter, up 38% over a year ago. Foundry Services declined by 2% to $171 million.
Wall Street investors will appreciate all the cost reduction promises, said Patrick Moorhead, an analyst at Moor Insights and Strategy. Revenues were down from a year ago, but still beat expectations, he noted.
Intel shares dropped 3% during the day on Thursday but rose 4% after market close to more than $27 a share.
Intel is shipping three new products: Arc consumer graphics, Ponteveccio data center AI processor and Sapphire Rapids. "This is a big deal," Moorhead said.
Moorhead predicted there will be layoffs, primarily in HR, sales, finance and marketing.
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