Intel axe expected to cut a wide gash in costs

A scheduled company-wide webcast by Intel is expected to be the medium for announcing job cuts widely predicted by analysts and leaked by insiders to leading technology news site www.News.com last week.

The company is expected to announce at least 10,000 job cuts tomorrow, when chief executive Paul Otellini briefs employees on the results of a top-to-bottom internal review of the company commissioned last April after Intel reported its largest profit drop in four years.

An Intel spokesman at Intel's Santa Clara, California headquarters said the company would reveal to employees and media the conclusions of the report and its corporate action plan "by the end of September".

Last Friday, Intel Ireland, which employs about 5,500 people, called media reports of pending layoffs "speculation" and declined to comment on whether Ireland would be affected by any cuts.

In Intel's second-quarter financial results in April, Otellini predicted Intel's first sales drop in five years and management said the company was unlikely to meet its 2006 sales forecasts.

Revenue for the second quarter totalled $8 billion, and net income was $885 million, but these figures were a 13 per cent and 57 per cent drop, respectively, on the same quarter a year ago.

At the time, Mr Otellini announced the company would conduct an internal examination. "We are going to restructure, resize and repurpose Intel to adjust to the business realities of today and tomorrow," he said.

Intel would not say whether such restructuring would require job cuts, but analysts believe the chipmaker, which rarely has opted for across-the-board job cuts, is likely to cut positions or divisions in specific segments of the company tomorrow.

In July, Intel trimmed 1,000 managerial jobs worldwide, including an undisclosed number through voluntary redundancy in Ireland. This was said by an Intel spokesman in California to be the first step in the company's restructuring to remove $1 billion dollars in annual costs.

Two communications units were also sold off, shedding another 2,000 jobs.

After briefings from Intel management, analysts at the time were predicting that investors were looking for 10,000 to 20,000 redundancies, including those already made, from the chipmaker to lower costs.

Lehmann Bros predicted that divestitures and strategic acquisitions would also be part of the cost-cutting.

Last week, insiders told News.com that marketing positions would be slashed. Analysts say Intel's unprofitable NOR flash memory unit could also be cut.

Intel already restructured and streamlined its two flash memory divisions last year.

But the company could take write-offs on existing stock and slow investment in new plants being built in Israel and Arizona instead.

The Irish operation does not have a marketing division but does have a 130nm NOR flash manufacturing division. Most Irish production is concentrated on chipsets and microprocessors, however. Analysts say engineering jobs are unlikely to be targetted.

In past Intel rationalisations, Irish operations have barely been touched or have remained unaffected.

The predicted cuts would be the largest since the volatile 1990s.

"This is a take-no-prisoners attitude," Martin Reynolds, a Gartner Group analyst told the San Francisco Chronicle this weekend. "You don't get to do this kind of thing too often in a company. So when you do it, you do it hard."

Intel shares rose on Friday at the prospect of the company implementing far-reaching cost cutting measures.