As it announced slightly better than expected Q1 results yesterday, Intel also confirmed there would be job cuts in the coming months, but engineering may escape.
Intel’s share price dropped last night after its earnings announcement forecast softer revenue in Q2, although its Q1 results were actually a little higher than had been expected by analysts at $12.7bn.
“The current macroenvironment is creating elevated uncertainty across the industry, which is reflected in our outlook,” Intel CFO David Zinsner said in the Intel statement.
In a memo to all Intel employees, titled Our Path Forward, Intel CEO Lip-Bu Tan welcomed the relatively good Q1 results, but said the company needed to build on that progress, and become an “engineering-focused company”.
“It won’t be easy,” he said. “We are navigating an increasingly volatile and uncertain macroeconomic environment, which is reflected in our Q2 outlook.
“We need to confront our challenges head on and take swift actions to get back on track,” he said. “Our flatter executive team [ET] structure that I shared last week was a first step. The next step is to drive greater simplicity, speed and collaboration across the entire company.
“We need to get back to our roots and empower our engineers,” Tan continued. “And many of the changes we will be driving are designed to make engineers more productive by removing burdensome workflows and processes that slow down the pace of innovation.”
He went on to reconfirm that this would mean reducing costs and removing organisational complexity. “Many teams are eight or more layers deep, which creates unnecessary bureaucracy that slows us down. I have asked the ET to take a fresh look at their respective orgs, with a focus on removing layers.
“Our competitors are lean, fast and agile – and that’s what we must become to improve our execution,” said Tan. “There is no way around the fact that these critical changes will reduce the size of our workforce.
“This will begin in Q2 and we will move as quickly as possible over the next several months.”
Government reaction
Minister for Enterprise, Tourism and Employment Peter Burke, TD, put out a statement this morning confirming that his department and IDA Ireland were engaging with Intel. He said it would be several weeks before it was clear what the impact would be on Intel’s Irish operations.
However, like many commentators, he sounded a note of optimism, in that Tan’s messaging yesterday emphasised an engineering focus, making the Irish operations fairly critical.
“While we await further specifics on potential downsizing, which is an incredibly anxious time for Intel’s staff, it is positive that the company have stated that they will continue to focus investment on their core business, the manufacturing of semiconductor products,” said Burke. “This is the primary activity in Ireland.”
He also noted that Intel has completed the construction of the most advanced semiconductor manufacturing facility in Europe in Fab 34, now in production in Leixlip, and expressed hope it could be central to Intel’s growth recovery strategy. Fab 34 represented an investment of €17bn, just the latest in a long history of investment in Ireland over 35 years.
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