Intel to Cut at Least 5,000 Jobs


Published: Thursday, January 22, 2009 at 6:01 a.m.
Last Modified: Thursday, January 22, 2009 at 2:33 p.m.

MOUNTAIN VIEW, Calif. — With demand for its chips drying up at record rates, Intel has decided to shut down several plants and dismiss thousands of workers.

Fresh off one of its worst quarters in the last 25 years, Intel, based in Santa Clara, Calif., told investors after the market’s close on Wednesday that it would lay off at least 5,000 people.

The cuts result from the closing of three chip-testing facilities in Asia and halting operations at plants in Oregon and California. The closed facilities mostly used aging technology, and Intel will continue to invest billions of dollars this year in new plants, said Chuck Mulloy, an Intel spokesman.

As many as 6,000 people could be dismissed, depending on how many workers can secure jobs at other Intel plants. Intel employed 84,000 people at the end of last year, and had already eliminated 20,000 jobs in the last three years.

According to some analysts, the company has exhibited a focus on cost-cutting and decisive, sometimes painful action under the leadership of its chief executive, Paul S. Otellini.

“He has turned the company into a leaner, meaner organization,” said Ashok Kumar, a securities analyst with Collins Stewart. “He is making all the right moves.”

Last week, Intel reported a 90 percent drop in fourth-quarter net income, earning $234 million after a $1 billion charge. The company also posted a 23 percent drop in revenue, to $8.2 billion. In the last 25 years, Intel experienced similar drastic drops in revenue only twice — in 2001 and 1985.

“The pace of the revenue decline in the quarter was dramatic,” Mr. Otellini said last week.

Historically, chip makers have proved slow to curtail their production capacity when demand wanes. This time, however, Intel acted quickly to reduce the number of chips made with current manufacturing methods.

The company will decrease its investment in more advanced chip-making technology only if conditions worsen, Mr. Otellini said last week.

Other companies linked to the PC industry are suffering as well.

The disk-drive maker Seagate reported preliminary second-quarter figures on Wednesday, showing a net loss of $496 million, in contrast to net income of $403 million in the period last year.

Advanced Micro Devices, Intel’s main rival, has cut salaries and enacted a plan to dismiss 9 percent of its work force as it prepares to report a hefty decline in fourth-quarter revenue on Thursday.

Also on Thursday, investors will examine Microsoft’s second-quarter results, looking for insight into PC software sales.

Shares of Intel rose more than 3 percent during Wednesday’s trading, to $13.26. The news of the layoffs, released after the market closed, sent shares up about 1 percent in after-hours trading.

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