Intel recently revealed its decision to reduce its staff by 15% as part of a strategic move to cut costs amounting to $10 billion. The tech giant made this announcement during its second-quarter earnings report. CEO Pat Gelsinger emphasized the necessity to align the company's cost structure with its new operating model and implement fundamental changes in its operations. Gelsinger highlighted the company's underwhelming revenue growth and the failure to fully capitalize on significant trends like artificial intelligence.
In the second quarter, Intel reported a revenue of $12.8 billion, marking a 1% decrease from the previous year, along with an income loss of $1.6 billion. Once a dominant force in the chipmaking industry, Intel has faced challenges in recent years, particularly in the wake of the mobile computing revolution. Competitors like Qualcomm and Texas Instruments have surpassed Intel in market value, with Nvidia emerging as a leader in AI technology.
Intel's struggles in the AI sector have been evident, with the company lagging behind Nvidia in this rapidly growing market. The company's Foundry business, which it heavily invested in for the AI era, experienced significant losses. Despite its efforts to realign its business model and reduce costs, analysts remain skeptical about Intel's ability to regain its competitive edge in the evolving chip market.
Intel is also embarking on a risky venture by considering manufacturing competitors' processors, aiming to serve as a white-label factory for companies like Apple. This strategic shift will involve substantial investments and job cuts, as the company seeks to position itself as a reliable chip manufacturer in the global market.
While Intel remains hopeful that its investments in AI will yield positive results, the company plans to reduce expenses by tens of billions of dollars, cut 15,000 jobs, and sustain investments in semiconductor supply chain resilience. Intel aims to achieve the $10 billion cost reduction target by 2025 and has decided to suspend its dividend starting the fourth quarter of 2024, leading to a 19% drop in Intel shares during after-hours trading.
