September 5, 2006 1:19 PM PDT

Intel lowers the boom on marketing, IT departments

Intel announced plans Tuesday to lay off thousands of workers over the next year after a strategic review designed to prepare the company for life with a smaller share of the chip market.

As first reported by CNET News.com, the layoffs primarily hit the marketing and information technology departments. The company said it will have 10,500 fewer employees by mid-2007, as compared with its headcount at the end of this year's second quarter.

The company hopes to save $2 billion in annual costs by knocking 10,500 employees off its payroll. That number includes several layoffs and divestitures already announced by the company, including the pending departure of 1,000 managers, and the sale of its communications unit to Marvell. Intel also sold some telecommunications assets to Eicon. About 2,000 employees were involved in those transactions.

Including those layoffs, divestitures and its normal rate of attrition, Intel has already shed 5,000 positions, said company spokesman Chuck Mulloy. The remaining 5,500 cuts will bring Intel's headcount down to 92,000 by the second quarter of 2007, and cost Intel $200 million in severance pay, he said.

"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," Intel CEO Paul Otellini said in a press release announcing the move.

The cuts will be focused on the previously mentioned departments in 2006, but will also expand to a broader base of Intel's population over the course of 2007, the company said. By 2008, Intel hopes the annual cost savings will reach $3 billion.

Intel wants to increase the ratio of marketing employees who work directly with its customers, as opposed to internal employees, Mulloy said. The company will also look to improve the efficiency of its manufacturing operation. By next year, Intel will start looking to other areas, including human resources and other departments, as it works its way down to 92,000 employees, he said.

Intel has been hurt by inroads made by its chief rival, Advanced Micro Devices, which has taken market share from the company in the desktop PC and server categories. AMD now owns 26 percent of the server market, compared to virtually nothing before its Opteron processor arrived in 2003, and it thinks it can reach 40 percent of that market by the end of the decade.

As a result, Intel's financial performance this year has disappointed investors. The company's profits have fallen as it has tried to shore up its market share with price cuts. Intel is pinning its hopes on a new generation of products based on a more energy-efficient blueprint that appears to outperform AMD's chips in several categories.

Intel is hoping that its restructuring and layoffs will have the same result that Hewlett-Packard's 15,000 jobs cuts had on that company's results, said Roger Kay, an analyst with Endpoint Technologies Associates. HP's profits have returned just over a year after it downsized, and its stock price has also improved.

"This is the other shoe dropping," Kay said. Intel's partners and customers will at least have the uncertainty removed from their dealings with the company, which is no consolation to the Intel marketing employees about to learn their fate, he said.

Intel's marketing department has already gone through several disruptions this year. In July, the company announced that its two primary marketing and sales executives, Eric Kim and Anand Chandrasekher, were being assigned to other positions within the company. Sean Maloney was named the sole head of the sales and marketing group at that time.

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39 comments

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Backup Plan Needed. And How!
This is all part of the changing economy. Companies like Intel and others continue to downsize in order to increase their bottom line. It's the nature of the business. Anyone who thinks their job is "secure" these days is either the owner of the company or a fool.

The stock market will continue to fluctuate. So what will you do in case you are left holding a pink slip like these 10,000 people?

The best time to have a backup plan is when you don't need it. If you are feeling safe and secure then now is the time to start preparing. At least that's my advice. I'm no expert. I've just seen too many people hit like this and if they had only prepared for it they would obviously have been a lot better off.

I'm just glad I found a way where I don't have to worry about being let go because I have a plan in place that will protect me. What's your backup plan?
Posted by richleick (7 comments )
Reply Link Flag
My Backup Plan
My backup plan = GROW HEMP everywhere, lol

and overthrow the cotton industry, you think it will work :- ) lol

Seriously, my backup plan is to make sure I have a good education, money saved!!! had a savings account opened by my mom when I was born.

So good thing I have investments, cash and big balls.
Posted by rmiecznik (224 comments )
Link Flag
Interesting Thought
Liked what you said, reminds me of a tolit in the flushing process. Has not hit the finale gurgle yet, but it can't be stopped its going to happen. Yup backup plans are a good idea!
Posted by Ted Miller (305 comments )
Link Flag
Gov't response to people with backup plans
If you have a year's salary saved up (which is what financial advisers recommend), you can expect:
1) Getting taxed on any interest, gains, dividends, etc. WITHOUT inflation being taken into account; and
2) Getting little or no financial aid for your kids when they head off to college.

The same kind of penalties are applied to old people who have saved up money over their lives, when it comes time for Medicare to kick in. Numerous other examples could be given.

In summary, our gov't REWARDS people who have spent all their earnings on who-knows-what and so have no savings to fall back on, with absolutely NO examination of their spending history. People are not stupid. Why do you think the US actually had a NEGATIVE savings rate last year, which hasn't occurred since the Great Depression?
Posted by dmm (336 comments )
Link Flag
Will this cut the Marketing Budget?
One reason why Intel has a larger consumer market share is because people watching TV, reading papers, websites and magazines, and basically consuming media are told to ask for Intel. Be it Intel Centrino Technology or Intel Core or any other Intel product.

Will this cut of the marketing staff also cut the marketing budget for these ads? If so, AMD may have a stronger chance of growing in the consumer space.

- rmjb
Posted by rmjb (28 comments )
Reply Link Flag
Apparently it's not working
AMD's market share has been going up despite Intel's massive marketing blitz
and their cozy long-term relationship with Dell.
Even an exclusive deal with Apple couldn't save Intel from layoffs.
Posted by Jackson Cracker (272 comments )
Link Flag
change directions
If you read the story they're changing the focus - more marketing people directly interacting with customers (I'll bet they have a whole team focused on Dell).

It's true that consumers go by what they hear in sound bites (as most election results sadly show), but in the end what most people care about is price and reliability. They could care less who makes the chips. Most people see them as commodities now that the prices are so low (relatively speaking). When the first Pentium system was several thousand dollars it was a different story - when people pay that much money they do serious research. When they can get a well performing box for under $600 it's a whole different story.

For Intel to improve mind-share for consumers it needs to explain in "mn on the street" terms why and how "core duo" etc etc is so much better, why they *should* demand "Intel Inside", and do it in 15-20 seconds. Tough sell.

I think more bang for the marketing dollar can be had by going directly to the companies making laptops, desktops, and convincing them first, and continuing their "Intel Inside" incentives programs. After all - the more PCs, laptops etc are *made* with Intel chips, the more the market share will be on the sales floor.

Of course this assumes a price/power-consumtion-dissapation/performance lead.
Posted by anonymous_coward1010 (11 comments )
Link Flag
That's what ignoring your competition will get you
I have to say, I don't like seeing this happen to Intel, but it's
almost like they begged for it.

While AMD continued coming out with innovative processors,
Intel just seemed to continue their status quo.

Now their employees have to pay the price and I hate seeing that
when it's those who guide the company that appear to have
dropped the ball.

This especially kills me when you look at the fact that Intel does
a good amount of manufacturing here in the United States.
Most chip companies don't do that.

Charles R. Whealton
Charles Whealton @ pleasedontspam.com
Posted by chuck_whealton (521 comments )
Reply Link Flag
So True
I cannot beleive these people were sleeping. I am not one who like to highlight outsized personalities but ever since Andy Grove move out of day to day management Intel seems to have lost in focus and is now paying the price.
Posted by Josimars (1 comment )
Link Flag
It's called....
corruption! This is happening in all levels of goverment and big business. They are all traitors of their own country. It will not get better it will only get worse, for we have all become complacent in our way of life. That was to be expected and that means the evil plan was a success! Sad is it not?
Posted by Ted Miller (305 comments )
Link Flag
Reduce execs pay
Execes at US companies pat themselves on the back as they shrink their work force to reduce costs. However, I fail to see why none of them do the right thing by reducing their ridiculously high wages and benefits. They are really full of it.
Posted by veritywell (2 comments )
Reply Link Flag
Increase layman's understanding
Executive salaries are set by the market just like every other commodity and form of labor. If a company does not pay competitive executive salaries it will end up with lousy executives and will lose money.
Posted by baisa (126 comments )
Link Flag
That wouldn't be nearly enough
They want to cut 2 to 3 billion dollars. Cutting exec pay won't do that,
no matter how much some socialists might want to believe otherwise.
Posted by Jackson Cracker (272 comments )
Link Flag
Really?
So why has AMD made the progress it made in the servers market plus DELL and other OEMs are now selling a number of configurations using AMD processors? All due to Intel marketing you think? Don't look now but Intel lost some market share, due to inferior products, over the last few years which ITs and knowledgeable buyers understand.

I for one never bought anything based on marketing alone. Many sources of legit info related to products and most of that isn't marketing based.
Posted by deeppow (3 comments )
Reply Link Flag
comment to
Comment to "Will this cut the Marketing Budget?"

Sorry for the inproper post. Me bad!
Posted by deeppow (3 comments )
Link Flag
Fire The Blue Man Group!
I mean paying for those idiots dressed in blue for the Intel COmmercials could have cost these people their jobs!!
Posted by zincmann (153 comments )
Reply Link Flag
RE: Fire The Blue Man Group!
Yeah, I hated those blue headed dudes... I have no idea what the heck they were supposed to be anyway.

Most of you reading this already know well, that AMD simply produced a superior product, and then priced it aggressively. Sure, there will always be Dell buyers and AOL subscribers, but consumers are getting more and more informed everyday. AMD deserves its increase in market share, as their Athlon 64 chips (especially the X2s) are far superior to Intels P-4s in more ways than one. Marketing had little to do with that, nor will it have anything to do with changing it

The problem or challenge as Intel should see it - is the same thing that faces Microsoft now, and IBM 20 years ago. They got old, fat, bald, wealthy, and forgot how to work hard. They looked at PE ratings, share values and CEO bonuses instead of the product itself. Notably, they lost Andy Grove, and worse, his philosophy.

Like the immediate challenge in front of Microsoft, Intel needs to get back to innovation, instead of concentrating on perpetuating.
Posted by gmycyk191 (32 comments )
Reply Link Flag
They aren't employees of Intel
FYI - The Blue Man Group is not employed by Intel. They were paid to star in several commercials. If you want to fire someone, try the marketing people who came up with the idea (wait a second - the marketing people *are* getting canned...).
Posted by Get_Bent (534 comments )
Link Flag
AMD isn't the performance leader any longer
It AMD a while, but they managed to soundly trump the Pentium 4. The NetBurst architecture of the P4 got very long in the tooth, and its inefficient thermal management just couldn't keep up with the faster clock speeds.

Intel has regained the performance crown with the new Core 2 Duo series. Its new architecture is more efficient, consumes less electricity, and produces less heat. At the same clock speed, the Core 2 Duo is much faster than the Athlon 64 X2.

Now it is AMD's turn to play catch-up. It'll be interesting to see what AMD creates to meet the challenge.
Posted by Get_Bent (534 comments )
Link Flag
It's a color thing
Intel needs to get its original color back. It seems when it shed its deep blue for the royal blue, it lost its mojo. On the other hand, AMD, with its tech green, is really deep into innovative technology. Have you ever heard of Chinese Feng Shui before?
Posted by b00tc0de (1 comment )
Reply Link Flag
stop the cuts
when is big business going to stop the cuts. if we have no jobs whos is going to buy the product!!!!
and when our economy goes down the tolet who takes the blame ?
i am getting tired of paying for "CEOS" to make millions and the guys that work for a living getting shafted
Posted by sipila (1 comment )
Reply Link Flag
economics 101
Perhaps you should learn basic economics, or do they not teach it in the schools in your state?

If you have too many workers for your cash flow to support, then you have a serious problem.

You can't just "pass on the costs" in order to make up for it.

Just like you can't raise taxes endlessly to pay for every liberal social program in sight.

Just as you and I have to live within our incomes, so do companies and governments.

If you want cradle-to-grave socialism, then go live in a socalist country such as Germany, France, etc - and be prepared for astronomically high unemployment and 50%+ taxes (don't forget about high VAT, either).

That said, I think it's time to stop shipping jobs overseas - Intel has managers whose bonuses depend on how many jobs they can ship overseas, and how fast.

Also about the previous post "it's a color thing" - Intel has whole teams of HR people who are paid to *not* hire white males. In times of hiring crunches or even "hiring freezes", Intel will hire "minority candidates" but refuse to hire white males. They call this "diversity" - when in fact it's against the law.

So if Intel says they want to shed some HR personnel, then well done. Of course they need to stop their "diversity" program too (what happend to a color/gender blind "hire the best candidate for the job" as required by law).
Posted by anonymous_coward1010 (11 comments )
Link Flag
Stop the cuts
I totally agree with you on that, not just Intel but all major and minor corporations. It just so happens I like AMD better anyway, but ceo's are ceo's. They all make too much money while sitting on their *****.
Posted by janesman2005 (5 comments )
Link Flag
intel complacency
that's what happens when you stop looking at your rear view mirror and develops tunnel vision...whoosh...that's the sound of AMD passing by, fools!
Posted by microsoft slayer (174 comments )
Reply Link Flag
incentives
If you'll Goggle it enough, you'll find that their exec's pay is mostly bonuses that are tied to company performance. Their base salary isn't millions, it's "only" a couple hundred thousand. Granted that's a ton of money, but it's an order of magnitude from "millions". When the company does poorly so to the execs - relatively speaking.

That said, I agree that exec's (in most if not all companies) are too highly paid.

But that said, how many of us could make the big decisions well enough? Shouldn't pay be relative to skillsets? For example almost anyone can happer nails, that's why laborers are paid lower than jobs requiring degrees (unions not withstanding).
Posted by anonymous_coward1010 (11 comments )
Reply Link Flag
because...
The IRS won't let a company write off any more than 1 million in salary for any employee but perks don't count in that equation.
Posted by drfez (15 comments )
Link Flag
Smart cookie
I think the reason Intel is in the position it's in can be traced directly to two things.

1) Focusing on "the internet" instead of performance - all because some moron came up with that infamous "interactive Super Bowl commercial" about 7 years ago where they let technically-illiterate football fans decide which way they should go with their marketing strategies. Dumb dumb dumb.

2) Craig Barrett. What did Barrett do his entire tenure - encourage performance gains? No - he built factories. "We'll build our way out of this recession", naively *assuming* demand would follow because that was what happened in the last recession, forgetting that the competitive landscape had changed in the meantime, with AMD having a much better portfolio than in 1990.

Layoffs notwithstanding I think Otellini is one smart cookie and the right guy to have in charge given the alternatives.

Somehow I don't think "Core Duo" and etc would have the priority it does under Barrett. Maybe I'm wrong, but Barrett never impressed me - I think he's good at running factories, but not whole companies.
Posted by anonymous_coward1010 (11 comments )
Reply Link Flag
INNOVATE!
That; "The company hopes to save $2 billion in annual costs by knocking 10,500 employees off its payroll. That number includes several layoffs and divestitures already announced by the company, including the pending departure of 1,000 managers, and the sale of its communications unit to Marvell. Intel also sold some telecommunications assets to Eicon. About 2,000 employees were involved in those transactions...." the fact that apparently sound financial, economic and technical projections have suggested how Intel is likely to perform in the future should also inform Intel's judgement that it can very well venture out into the business consultancy marketplace similar to the offerings from IBM and other India-based companies (TATA...); spin-off one of its units to be called - Intel Business Consulting/Intel Global Services and retaining some of these workers that are apparently headed for the bread-lines! ;-) ;-) ;-)
Posted by Captain_Spock (894 comments )
Reply Link Flag
ensign goner, your orders are to ...
take 10.5K red jersey crew members and beam them down to the planet's surface. maybe you should also beam down with them just to see that things go as planned :)
Posted by Lolo Gecko (131 comments )
Reply Link Flag
This is Spock on board Enterprise Warp!
We read you loud and clear - "take 10.5K red jersey crew members and beam them down to the planet's surface...." to do what! What are the historical figures for decision-making and who computed them; and, on what since the WARP 5 ENGINES are not yet on line:

Token Ring Adapters
OS/2 WARP Connect Workstation Installation:

<a class="jive-link-external" href="http://www.intel.com/support/tokenexpress/sb/cs-012017.htm" target="_newWindow">http://www.intel.com/support/tokenexpress/sb/cs-012017.htm</a>

BEAM US ABOARD HOUSTON! :-( :-( :-(
Posted by Captain_Spock (894 comments )
Reply Link Flag
feed them to the klingons ...
if they eat gah, they'll eat anything :)
Posted by Lolo Gecko (131 comments )
Link Flag
Innovative Solutions from INTEL....
... can easily be developed by realizing that INTEL has not followed similar strategies like TANDBERG and others of integrating IBM's Lotus Sametime 7.5 for ehnancing Audio and Video Streaming ( <a class="jive-link-external" href="http://www-306.ibm.com/software/lotus/partnershowcase/sametime/" target="_newWindow">http://www-306.ibm.com/software/lotus/partnershowcase/sametime/</a> ) ; these "innovative" developments from INTEL could have been demonstrated at places like WARPSTOCK 2006 to be held in Canada lated this year: <a class="jive-link-external" href="http://www.warpstock.org/" target="_newWindow">http://www.warpstock.org/</a> from where LIVE SESSIONS could be BEAMED around around the world - Compliments of INTEL TECHNOLOGIES. Beam some of the 10.XXK to WARPSTOCK 2006 so that their MINDS CAN GET WARPED. DUH! ;-)
Posted by Captain_Spock (894 comments )
Reply Link Flag
Hmm, no wonder I noticed some...
...of the Intel exec names at this site --&gt;

<a class="jive-link-external" href="http://www.whotohate.com" target="_newWindow">http://www.whotohate.com</a>
Posted by morkster (7 comments )
Reply Link Flag
look into finance dept for cuts
seriously, 80% of intel finance mgrs are useless. they spend more time thinking how to justify their time and trying to befriend ops people who will support them at focal time. a lot of talk and no work.
and even some analysts working in "strategic" projects are making 80k for nothing. i know what i am talking about, believe me. the bubble has to burst one day.
Posted by amerifat (3 comments )
Reply Link Flag
 

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