At the latest quarterly reporting conference, Intel’s management was forced to state that by mid-decade it hoped to reduce annual costs by $ 8-10 billion and savings would reach $ 3 billion next year. for technical support, sales and marketing costs.
Image source: Intel
What already noticed the day before, Intel reps did not indicate how much staff could be reduced, but CFO David Zinsner (David Zinsner) made it clear that the changes could reach “significant amounts”. According to rumors, Intel’s individual divisions will lose up to 20% of their staff. Already now the company started to cut costs, and incurred $ 664 million in related expenses in the third quarter. Essentially, firing employees means paying them severance pay and the company will be forced to increase costs before saving on paychecks. . It is possible that part of this amount was used only to pay the severance pay.
Already during the tenure of Patrick Gelsinger (Patrick Gelsinger) as CEO of Intel, the company began to get rid of units that, according to certain criteria, did not correspond to its strategic objectives. This summer it was decided to abandon the release of Optane-type memory (3D XPoint), shortly before Intel decided to end the history of the development of the drones that “rose to heaven” under Brian Krzanich. True, Mobileye’s IPO can hardly be called a branch of the core business, because Intel owns about 95% of the company’s shares. But the vector of this movement itself suggests that companies would like to quickly get a return on multi-billion dollar investments in active driver assistance.
Find additional resources to optimize costs in the more distant future, Intel intends and during the transition business models “internal contract manufacturer”, which implies an increase in the administrative independence of the unit responsible for the production of chips. Indeed, it will need to show more independence in its interaction with full-time chip developers.
So far, Intel is not ready to back down from its plans to master five new technical processes in four years. Patrick Gelsinger at the quarterly event also said that success comes with each new quarter. By 2025, the company is still aiming to regain its technological leadership. For this reason, in the next few years, capital expenditures related to income will remain at 35% and then shrink to the more familiar 25%.
As pointed out by the resource The register, Intel does not have many sources of funding for such plans in the face of deteriorating market conditions. This year, the company’s revenues will drop by $ 13 billion compared to the company’s expectations at the start of the year and, compared to last year, it will drop by 20%. Building new businesses requires multi-billion dollar investments. Of course, up to two-thirds of the funds for these purposes will be covered by state subsidies and money from customers or partners, but up to 30% of the budget for each new project will be covered by Intel with its own capital.
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