Intel to lay off 12,000 employees, 11 percent of its workforce

The rumors about massive layoffs at Intel turned out to be very accurate, the chip giant just announced a new restructuring initiative to accelerate the firm's transformation from a PC company to one that "powers the cloud and billions of smart, connected computing devices".

In an e-mail to Intel's employees, CEO Brian Krzanich explained that data center hardware and Internet of Things are now Intel's primary growth engines, combined with memory and FPGAs. These business units delivered $2.2 billion in revenue growth in 2015, made up 40 percent of Intel's revenue and the majority of the company's operating profit.

The move towards a leaner and more profitable Intel will involve the reduction of up to 12,000 jobs globally, via a combination of voluntary and involuntary departures. In total, this involves 11 percent of Intel's global workforce. Most of the layoffs will be communicated over the next 60 days but some actions will span in to 2017.

Intel Corporation today announced a restructuring initiative to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices. Intel will intensify its focus in high-growth areas where it is positioned for long-term leadership, customer value and growth, while making the company more efficient and profitable.

The data center and Internet of Things (IoT) businesses are Intel’s primary growth engines, with memory and field programmable gate arrays (FPGAs) accelerating these opportunities – fueling a virtuous cycle of growth for the company. These growth businesses delivered $2.2 billion in revenue growth last year, and made up 40 percent 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 e-mail 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 center, IoT, memory and connectivity businesses, as well as growing client segments such as 2-in-1s, gaming and home gateways.

These changes will result in the reduction of up to 12,000 positions globally — approximately 11 percent of employees — by mid-2017 through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs. 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 program 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.