Intel Corp (NASDAQ:INTC, ETR:INL)’s stock fell 5.50% in trading overnight as investors reacted to a disappointing earnings report for the second quarter of 2024, a judgement the company itself doesn’t dispute.
“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” Intel CEO Pat Gelsinger said.
“Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation.”
One of the “decisive actions” the computer chip giant has flagged for its planned US$10 billion cost saving strategy is the axing of 15,000 jobs.
Intel is also suspending its dividend from the fourth quarter this calendar to maintain liquidity.
Reducing spending on R&D and marketing
Intel says its focused on four core cost saving measures, specifically reducing operating expenses, capital expenditures, and cost of sales while maintaining its core investment and long-term strategy.
The CPU maker expects to save US$20 billion in 2024 alone by laying off 15,000 workers, between US$11 billion and US$13 billion with restructuring its capital efficiency and investments, and a further US$1 billion with sales costs reductions.
“Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity,” Intel CFO David Zinsner said.
“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet.
“We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders.”
Intel says the majority of layoffs will be complete by the end of 2024, representing a 4% contraction in the company’s workforce.
Gelsinger writes in a memo to employees that Intel will offer a “companywide enhanced retirement offering for eligible employees” and will welcome voluntary layoffs starting next week.