- Intel is ignoring the AI trend and now it's dropping every sixth position.
Intel is aiming to overcome its years-long economic downturn with a billion-dollar cost-cutting program. The struggling chipmaker announced plans to eliminate more than 15% of its approximately 125,000 jobs. "I need fewer people in the headquarters and more people in the field to serve our customers," CEO Pat Gelsinger said in an interview.
Saving Ten Billion Dollars and No Dividend
He aims to save more than ten billion dollars next year, with the temporary elimination of the dividend also contributing to this. "Our goal is to eventually pay a competitive dividend again," said Gelsinger. "But for now, we're focusing on our balance sheet and debt reduction."
The Intel CEO also plans to reduce investments. For 2024, he is targeting expenditures between $25 and $27 billion. Next year, the amount is expected to drop to $20 to $23 billion. It remains unclear what impact this could have on the planned construction of a chip factory in Magdeburg. The company had originally announced plans to build new factories in various countries for several dozen billion dollars.
Intel Stocks Plummet
Investors reacted to the cost-cutting measures by selling shares, causing Intel stocks to drop by around 20% after-hours. This was the strongest decline in four years.
"The cost-cutting program shows that management is ready to take drastic measures to turn the ship around and solve the problems," said Michael Schulmann, chief investor at asset manager Running Point. "But we're wondering if that's enough." Additionally, the decision comes a bit late, as Gelsinger has been leading the company for three years.
Due to the boom in Artificial Intelligence (AI), demand for classic processors for data centers is decreasing. Intel currently lacks a competitive AI chip to challenge market leader Nvidia. Rival AMD recently acquired AI developer Silo AI and provided an optimistic outlook when presenting its earnings.
Revenue Down by One Percent
In contrast, Intel's revenue in the second quarter fell by one percent to $12.8 billion, as expected. For the current quarter, the U.S. company expects revenues between $12.5 and $13.5 billion, around one billion dollars less than predicted by analysts.
The following cost-cutting measures announced by Intel include the temporary elimination of the dividend to save over ten billion dollars. The Intel CEO also plans to reduce investments for the upcoming years.
