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Intel Has Several Potential Reasons To Launch Major Layoffs

Summary

This Seeking Alpha Eye on Tech column looks at a report Intel is planning to announce a major round of layoffs.

In addition to weak PC sales, the Altera acquisition, mobile loss-reduction efforts, and a manufacturing strategy change could be motivating Intel to pare headcount.

It's also possible a recent management shakeup and more transparent financial reporting are playing roles.

Intel (NASDAQ:INTC) laid off 5% of its workforce in 2014, and it appears as if a fresh round of big job cuts is on the way. The Oregonian, based out of a state that houses nearly a fifth of Intel's 107K employee workforce, reports the chip giant is prepping "a significant round" of layoffs across business units this spring.

The newspaper adds the cuts "will reduce employment in some parts of [Intel's] business by double-digit percentages," translating to thousands of job cuts by year's end. No specific date is given on when they'll be announced. Intel's Q1 report (due on Tuesday afternoon) would be a logical time.

Intel's historical headcount.

Source: Statista

The impact of weak PC sales

A look at Gartner and IDC's Q1 PC sales data helps explain at least part of Intel's motivation. Though tablet sales are also declining and smartphone growth has slowed considerably (the law of large numbers), PC shipments managed to drop by double digits or close to it on a Y/Y basis in Q1, a rate of decline that outpaced even the substantial rates seen in Q4. And Intel still got 58% of its revenue from its Client Computing Group in 2015.

This clearly isn't just about mobile device spending taking dollars away from PC spending: A lot of PC users simply feel as if their existing systems are good enough for the productivity and entertainment apps that they normally run. Going forward, there might be several...


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