Intel will cut 4,000 jobs worldwide after a disappointing set of second-quarter results blamed on sluggish sales in Europe. But the chip giant's Irish operations could escape the cuts, which amount to 5 per cent of the workforce.
Work will continue on the Fab 24 project at its Leixlip, Co Kildare, facility, which is expected to come onstream in the first half of 2004. Intel announced last April that it was restarting work on the fabrication plant, after two postponements of the $2 billion (€1.98 billion) project. It expects the plant, which will use a new type of technology that is more efficient in the manufacture of computer chips than those currently available, will help create 1,000 extra jobs.
The news came as Intel announced a profit after tax of $446 million, or seven US cents a share for the three months to the end of June on sales that were fractionally lower than in the same period a year ago at $6.3 billion. Setting aside one-off acquisition charges, the company said it earned nine US cents a share, below the 11 cents forecast by analysts.
Earlier this month, Intel warned it would not meet previous previous sales forecast of $6.4 billion to $7 billion, lowering the range to $6.2 billion to $6.5 billion. At the time, it blamed lower-than-expected sales on soft demand for PC processors in Europe.
Chief executive Mr Craig Barrett said the company had "continued to execute well" in a tough environment. "Although an overall industry recovery has been slow to materialise, we still expect a modest seasonal increase in demand in the second half."
Intel, which along with others in high technology has suffered from slowing economies and PC sales, also forecast that gross margin in the third-quarter would rise to about 51 per cent from 47 per cent in the second quarter. It forecast third-quarter sales of $6.3 billion-$6.9 billion but said R&D and capital spending in 2002 would be lower than previously forecast.
"We haven't seen an economic recovery in our business yet," said Mr Andy Bryant, Intel's chief financial officer. "We want to be cautious in our spending."
The company expects to shed the 4,000 jobs over the next six months through voluntary redundancy and attrition. Unlike other high-tech firms over the past year, Intel escaped massive lay-offs. Instead, it slashed discretionary spending such as travel and delayed raises.
Despite the poor results, there was good news for Intel's Irish operations in Co Kildare, with a spokesman saying the company did not expect "any material impact", although he said it could not exclude some impact from attrition and prudence in terms of hiring.
"Business is not great but, in the current climate, we would rather be in Intel than elsewhere," said a spokesman for Intel Ireland. He pointed to the company's increasing market share and said the Irish operations were holding their own.
He said construction of the new fabrication plant was on track, with 800 people employed in building on the site. "There is no change to our plan," he said. "None of the current issues will impact on it. It is a key piece of Intel's future product and technological development."
Ahead of the figures last night, Intel shares surrendered 3.97 per cent of their value, with markets unsure of how to read the announcement from Mr Barrett to staff. In after-hours trade, the stock was mostly flat.
Intel employs 3,150 people at its Leixlip plant.
- (Additional reporting: Reuters)
