At its first quarter earnings call earlier today, the world’s largest semiconductor chipmaker, Intel Corporation, announced a major restructuring drive that it says will “accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices”. According to Intel, data center and IoT (Internet of Things) are its most profitable businesses right now, and the Santa Clara, California-based tech company expects that trend to continue in the foreseeable future. These two businesses together brought in around 40% of the company’s revenues last year amidst a shrinking global PC market that has seriously affected the profitabilty of leading tech companies like Intel, Dell and Microsoft, all of whose businesses continue to rely heavily on the personal computing space even as Silicon Valley tries to transition to the so-called “post-PC era”.
Intel says that it expects the consolidation to result in up to 12,000 redundancies worldwide, which is around 11% of the company’s entire workforce. According to a press release from the company, the entire process should be over by mid-2017, but affected employees will be intimated about their fate within the next couple of months. The CEO of Intel, Mr. Brian Krzanich, informed the company’s employees about the impending restructuring drive through an e-mail, in which, he expressed hope that “these actions (will) drive long-term change to further establish Intel as the leader for the smart, connected world”. He also said that he’s confident the company will be more productive “with broader reach and sharper execution” post restructuring.
Coming to the financial aspect, Intel says that it believes the cost-cutting measures will result in the company taking a hit of $1.2 billion as a one-time charge, which will reflect in the company’s balance sheet in Q2, 2016. However, notwithstanding that massive hit, the company still expects to save over $750 million this year alone, with total savings of over 1.4 billion by the middle of next year. It will be interesting to note how this goes down with the company’s employees, many of whom will undoubtedly spend sleepless nights wondering if it is them who’ll face the axe. However, the company’s investors will probably be hoping that the restructuring drive is a success and post-restructuring, the management will be able to deliver on their promise.