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Massive Layoffs at Intel Amid Shift from Core PC Business

Intel yesterday dropped the gauntlet showing it has abandoned hope of a sustained revival of the traditional PC business that put it on the map with its restructuring that will eliminate 11 percent of its workforce, totaling 12,000 employees.

In a letter to employees yesterday, Intel CEO Brian Krzanich said the company's primary growth is coming from providing datacenter, cloud, memory and Internet of Things. Those businesses provided $2.2 billion in revenue growth last year and accounted for 40 percent of the company's revenue. It also was the basis of the bulk of Intel's profit, Krzanich said.

"Our results demonstrate a strategy that's working and a solid foundation for growth," according to his letter. "Our opportunity now is to accelerate our momentum and build on our strengths. But this requires some difficult decisions. It's about driving long-term change to further establish Intel as the leader for the smart, connected world."

Revenues from Intel's client computing group for the quarter ended March 31 of $7.5 billion grew only 2% year-over-year but dropped 14% sequentially, though the end of the year traditionally has the highest volumes, according to the company's first quarter earnings report released yesterday. By comparison, the company's Data Center Group posted $4 billion, up 9% year-over-year. Intel's Internet of Things Group revenue of $651 million showed a 22% year-over-year increase.

While Intel's not abandoning the PC business, the restructuring will let the company focus on more realistic revenue and growth moving forward. In addition to its focus on datacenter and IoT, Intel also sees growth in commercial PCs including hybrid tablet PCs (also described as 2-in-1s), connectivity solutions, gaming and home gateways.

"Intel appears to have decided that it can't wait any longer for a hoped-for revitalization of traditional PC markets," said Pund-IT Principal Analyst Charles King, in a blog post. "That doesn't mean that PCs are dead by any means. There will likely be occasional upward spikes in sales related to new features, vendor innovations and businesses upgrading their office environments, but the salad days of the industry, when people camped out overnight to buy new PCs, are receding into the past."

King also noted that Intel is focusing on what has evolved into its core strengths and where consumer and enterprise IT is headed. "It also works strategically by opening new business opportunities and spurring future growth. IoT could be an especially fruitful area since it plays to Intel's data center leadership position and its strengths in mobility."

Posted by Jeffrey Schwartz on 04/20/2016 at 12:48 PM


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