Intel to cut staff in face of stagnant earnings

Intel says it may have to cut staff this year but has not said if the Ronier Acres Campus plant will be affected. Image: Intel

Word of the job cuts came a day after Intel reported that its net profit last year sank 13% but that the troubled personal computer market appeared to be stabilising. Intel shares remained around the closing price of US$25.85 in after-market trades.

"We do expect employment to come down by about five percent by the end of the year," Intel spokesman Chris Kraeuter told AFP.

"It is something we regularly do to make sure that the people we have match up with our priorities," he added.

Kraeuter said California-based Intel ended last year with 107,600 workers. He declined to disclose which positions or locations would be targeted for cuts.

According to Kraeuter, trimming the workforce could include simply not filling positions as people quit or retire.

He contended "it would be wrong to conclude this is a layoff."

Intel reported it made a net profit of US$9.6bn on revenue of US$52.7bn last year compared with US$11bn in net profit on US$53.3bn in revenue the previous year.

"We had a solid fourth quarter with signs of stabilisation in the PC segment and financial growth from a year ago," said Intel chief executive Brian Krzanich.

In the final quarter of the year, Intel posted profit of US$2.6bn on revenue of US$13.8bn compared with US$2.5bn net income on US$13.5bn in the final quarter of 2012.

New products coming from Intel

Intel's chip sales are down as computer sales have fallen and tablet and smartphone sales have risen. Image: Latest Digitals

"We've built a strong foundation for our business by bringing innovation to the market more quickly across a wide range of computing platforms," said Krzanich.

"For example, at CES, we demonstrated multiple devices that weren't on our roadmap six months ago," he said referring to the Consumer Electronics Show gadget extravaganza in Las Vegas that ended two weeks ago.

Krzanich said at the event Intel would produce on its own products or partner with other manufacturers to make a range of products that range from a health monitor integrated into baby clothes to a heart monitor in earbuds.

He showed the company's new "personal assistant" dubbed Jarvis, which is Intel's answer to the voice-activated Google Now and Apple Siri.

Intel will be producing a smartwatch with "geofencing" which allows families to get alerts if children or elderly people leave a specific geographic area.

"The new devices shown to the large CES crowd will all be available this year," Krzanich said, without offering details on pricing or specific partners for the products.

"The problem with mobile and wearables is the more you win, the more you lose," said analyst Rob Enderle of Enderle Group in Silicon Valley.

"Intel is a large margin company, and wearables are a small margin product," he said.

Wearables the new craze

The analyst was referring to the window for profit being typically higher on chips for personal computers than on processors powering smartphones, tablets or products in the "wearables" category.

Intel remains the world's biggest producer of chips for personal computers but has been lagging in the surging mobile market of tablets and smartphones.

The new initiative could allow the firm to get a bigger slice of the mobile market's newest iterations. Intel forecast revenue in the current quarter of about US$12.8bn saying the market would be flat for the coming year.

Market sales indicate that the trend of switching from personal computers to tablets is slowing, according to Enderle.

"It is starting to drift toward equilibrium," the analyst said. "It will stabilise eventually and Intel will grow around it. It is just that, until it gets there, it will be painful."

According to Enderle, any heralding the demise of the personal computer is premature, adding that the modern lifestyles support a mix of PCs, tablets, and smartphones.

Source: AFP via I-Net Bridge