Intel Corporation has taken significant steps to reshape its workforce and business strategy as it aims to regain market share in the competitive data center chip market. The continued mismanagement forced the company to lay off up to 15% of its employees just last month. This strategic decision is likely intended to increase operational efficiency and maximize profits. Authored by Jennifer Runck By the end of the year, Intel expects to be running with about 75,000 employees.
The company’s massive restructuring comes at a historic tide. As part of this effort, it seeks to bolster its share in the data center segment. Intel’s revenue for the last quarter reached $12.86 billion, surpassing analysts’ expectations of $11.92 billion. That positive financial outcome is driven by a great quarter from their data center group. Unbelievably, revenues seemed to breakout higher too, soaring 4% to $3.9 billion. Even with all that revenue growth, Intel was in deep trouble. For the second quarter, they posted a net loss of $2.9 billion, or 67 cents per share.
This was echoed by the CEO of Intel – Lip-Bu Tan – who called for careful, strategic investment choices in the future. “Over the past several years, the company invested too much, too soon – without adequate demand,” he stated. This prudence is a sign of Intel’s awareness of past mistakes, like a dispersed factory footprint that resulted in overcapacity.
Meanwhile, Intel has begun to flush out its financial strategy. The company recently announced budgetary reductions in its high burning foundry group and has terminated expanded fabrication efforts in Germany and Poland. Additionally, the company is further centralizing its R&D testing and wafer-level, advanced packaging assembly activities into a larger complex in Vietnam and Malaysia to drive operational efficiencies.
As part of its renewed focus on the data center market, Intel is actively seeking a permanent leader for its data center business. Tan has a strong conviction with product excellence and strategic alignment. He will personally review and approve all chip designs before they are taped out. “There are no more blank checks. Every investment must make economic sense,” he asserted, indicating a shift towards a more disciplined approach.
At the same time Intel’s client computing group, making chips for computers, pulled in $7.9 billion in sales, down 3% year over year. The company’s third quarter revenue will be about $13.1 billion at the midpoint of their guidance, which they are very bullish on. That’s a sign of some cautious optimism, even with the recent drop.
The restructuring efforts and strategic recalibrations are part of Intel’s broader initiative to regain competitiveness in an industry that has seen rapid advancements from rivals. The firm continues to hunt for one or more major customers to anchor its new foundry division. Yet, this division is the most promising space for growth in the future.