Intel Fires A Massive 12,000 Workers, 11% Of Its Entire Workforce, As It Misses Q1 Sales, Guides Lower

Tyler Durden's picture

There were some rumors reported late last week that the world's biggest chip maker was about to fire a major portion of its workforce. Moments ago the company confirmed these rumors, when it reported that it was firing a whopping 11% of its entire workforce, laying off a massive 12,000 workers.

From the report:

Intel Corporation today announced a restructuring initiative to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices. Intel will intensify its focus in high-growth areas where it is positioned for long-term leadership, customer value and growth, while making the company more efficient and profitable. The data center and Internet of Things (IoT) businesses are Intel’s primary growth engines, with memory and field programmable gate arrays (FPGAs) accelerating these opportunities - fueling a virtuous cycle of growth for the company. These growth businesses delivered $2.2 billion in revenue growth last year, and made up 40 percent of revenue and the majority of operating profit, which largely offset the decline in the PC market segment.

 

The restructuring initiative was outlined in an e-mail from Intel CEO Brian Krzanich to Intel employees.

 

“Our results over the last year demonstrate a strategy that is working and a solid foundation for growth,” said Krzanich. “The opportunity now is to accelerate this momentum and build on our strengths.

 

These actions drive long-term change to further establish Intel as the leader for the smart, connected world,” he added. “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.

 

These changes will result in the reduction of up to 12,000 positions globally -- approximately 11 percent of employees -- by mid-2017 through site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs. The majority of these actions will be communicated to affected employees over the next 60 days with some actions spanning in to 2017. Intel expects the program to deliver $750 million in savings this year and annual run rate savings of $1.4 billion by mid-2017. The company will record a one-time charge of approximately $1.2 billion in the second quarter.

As we asked rhetorically last week when the rumor first broke:

 

Confused? Don't be: it's all part of the new normal recovery, and don't forget the spin: don't think of its as 12,000 highly paid engineers and tech workers fired, think of it as 12,000 brand spanking new waiters and bartenders.

It was not immediately clear if INTC was boosting its buyback,but we do know that Intel also boosted its buyback both sequentially and annually, repurchasing $793 million in stock in the first quarter.

We also know Intel's just announced earnings beat on the bottom line as EPS came in at $0.54, above the $0.49 expected.

How did INTC "beat"? The same way IBM "beat" yesterday: instead of using the same tax rate as a year ago, when it had an effective tax rate of 25.5%, this quarter the tax rate was down 7.1% to just 18.4%.

Had INTC used the historical tax rate, it would have, surprise, missed.

Which is also why the company's GAAP (not to be confused with its non-GAAP) revenue of $13.7BN missed expectations.

Worse, INTC just cut its outlook, predicting revenue of $13.5 billion, plus or minus $500 million, for the Q2, about $700MM below consensus estimates.

And then INTC also cut virtually every full year forecast:

  • Revenue: up mid-single digits, down from prior outlook of mid- to high-single digits.
  • Non-GAAP gross margin: 62 percent, plus or minus a couple percentage points, down from prior
    outlook of 63 percent, plus or minus a couple percentage points.
  • Non-GAAP R&D plus MG&A spending: approximately $20.6 billion, plus or minus $400 million,
    down from prior outlook of $21.3 billion.
  • Restructuring charges: approximately $1.2 billion. Non-GAAP restructuring charges: zero.
  • Depreciation: approximately $6.3 billion, plus or minus $200 million, down from prior outlook of
    $6.5 billion, plus or minus $200 million.
  • Tax rate: approximately 22 percent, for each of the remaining quarters of the year, down from prior
    outlook of approximately 25 percent.
  • Full-year capital spending: $9.5 billion, plus or minus $500 million, is unchanged from prior
    outlook

The stock, inexplicably, is down despite the company cutting over 10% of its employees.

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Government needs you to pay taxes's picture

BULLISH . . . for growth in the free shitter population.

Looney's picture

That’s the “Change you can believe in!” for 12,000 people and their families.

Looney

Mr. Universe's picture

...think of it as 12,000 brand spanking new waiters and bartenders.

 

Not for long, have you been in a bar recently? $7 for a cocktail in Frisco. Two pizzas? North of 50 bucks.  There is only one way this economy is going.

knukles's picture

Now they can all get cheap ObamaCare to save money since they're not covered under Intel's group policy. 
Think of it!  A full life of retirement.  EBT, Section 8, an ObiePhone. 
They got it made in the American Dream

And if they were good patriotic Americans, they'd even go buy a Tesla to help out the environment.

AND .... to make sure they're treated well, they can all donate handsomely to the Clinton Global Initiative

wee-weed up's picture

The uh... economy uh... is doing uh... just fine! -- Obozo

nuubee's picture

Anyone reporting on Intel's mass layoff is peddling fiction.

Honestly, I can't wait for non-gaap paychecks.

JohnG's picture

I sure hope these former employees have enough tuna salad sandwiches to live on.......

nuubee's picture

1/4 can a day keeps starvation away.

Paveway IV's picture

Gates will be crying about MS needing and additional 12,000 H1-Bs any day now.

"We just can't find enough qualified computer people in the U.S.!"

eforce's picture

Nothing to upgrade to...

mtndds's picture

TRANSITORY people, its all TRANSITORY!!

gmrpeabody's picture

The good news is that Obama has just created 12000 new part-time, benefitless  jobs in the service industry...

FreeMoney's picture

Intel is not letting the chip engineers or PHD's in the labs go, they are scaling back the desktop/laptop chip production teams.  These things are litterally made all over the world.  All the super high tech will stay in Hillsboro OR.

svayambhu108's picture

Intel like any company has its moochers, clueless and utter psychos. When you get out that many people you will inevitably trow also some good guys.

https://www.youtube.com/watch?v=BKorP55Aqvg

 

PT's picture

Man, I could use some cheap ex-Intel engineers.  Make our own damn computers, the way computers should be.  Not sure I would hire any ex-Microsoft programmers though.  They'll probably fuck it up again.  Then again, if they were sacked for having a conscience, they may come in handy ...

Arnold's picture

Set out a plate of chocolate glazed Dunkins at the interview.

That'll weed them out quick.

mkhs's picture

Wait!  Are the good guys the ones that like chocolate or the ones that don't like it?

Antifaschistische's picture

and since the Intelites will need to take TWO jobs...this layoff will actually result in 24,000 new jobs (credit to the Obama admin)

Sanctuary2's picture

TUNA IS POISON*

DONT EAT IT-OR GIVE IT TO KIDS, ESPECAILLY!

 

 

* loaded with mercury, strontium 90 and other sweet things from FUKUSHIMA that circle, over and over, the entire Pacific Gyre-from the equator to the Pole

mkhs's picture

What difference will it make.  The algae is dying and so are we.

Hypoxia yours,

Peacefulwarrior's picture

Yeah, that Tepco Tuna is getting glowing reviews!

crazzziecanuck's picture

Fire 12,000 people and rehire them at the bottom of the salary ladder.  They rise up, fire them again.  Rehire.  Computes perfectly well.

Also, does this mean that the H1Bs of those losing their jobs in the USA will be cancelled now?  I wonder if there's a quasi blackmarket or something.  Lord knows the law is only for us little people.

Bangin7PoundCocks's picture
Bangin7PoundCocks (not verified) nuubee Apr 19, 2016 3:43 PM

As a shareholder, I am only happy with this development if they promise to increase executive compensation by 300% and commit to $20 billion in stock buybacks.

The_Dude's picture

Here is the exec compensation part:

Meanwhile, as 12,000 people see their jobs disappear, The Wall Street Journal reported in February that the company paid a whopping $25 million — including an $8.1 million signing bonus and restricted stock valued at an additional $ 8.1 million — to recruit former Qualcomm executive Venkata ‘Murthy’ Renduchintala to take over the ailing chip division.

I'm sure the stock buyback is coming

BlindMonkey's picture

I can promise that this has nothing to do with a higher minimum wage.  

booboo's picture

"Get me the Department of Rumors and Whispers on the Red Phone"

BandGap's picture

If they are outside Sacramento they have that wonderful Kaiser Permanente insurance. Just a hair better than O'Care.

Max Cynical's picture

Thanks to Obamacare, they no longer have to be tethered to that job.

N0TaREALmerican's picture
N0TaREALmerican (not verified) Mr. Universe Apr 19, 2016 3:26 PM

7 bucks is about average in SF.      If you go to a trending top 10% place, it's over 10.  

curbyourrisk's picture

Forced minimum wage of $15  is not only stupid, but highly inflationary.  Your price examples are soon to be the norm everywhere.  Now SHUT UP and accept it....  /sarc/

Billy the Poet's picture

Dude, you're getting the dole.

SheepRevolution's picture

That's at least 24.000 new low-paying part-time jobs! RECOVERY!

monk27's picture

Portland, OR was already a pretty shitty place. I hate to imagine what it will become now... Oh well, I guess it's "winning"... Yellen style !

Uranium Mountain's picture

More Strippers for me to tip on my next visit.  More ex Intel peeps opening 420 shops. More imaginative innovation in the making!

venturen's picture

an Obama recovery...where your revenue falls, you fire your employees, borrow at negative rates to buy your own stock....a Non-GAaP Miracle! 

ghengiskhan's picture

They no longer need employees.  Just churn the interest free money.  The peasant middlemen are no longer needed to act as walking ATMs.

j0nx's picture

These guys haven't done shit in 8 years. My Skylake box is marginally better than my 2600k. Not surprised.

Bunghole's picture

I see no need to upgarde my Ivy Bridge

JustPrintMoreDuh's picture

There just peddling fiction

jus_lite_reading's picture

$15/hr is not enough! We demand $85/hr! FEEL THE BERN OF COMMUNISM!

Gavrikon's picture

Whatever sinks this mutherfucker faster.

SHEEPFUKKER's picture

Here comes 12,000 waiters/bartenders