Intel has announced plans to cut over 15% of its workforce, equivalent to 17,500 jobs, and suspend its dividend starting in the fourth quarter. The move is part of the chipmaker’s efforts to turnaround its struggling manufacturing business.
Job Cuts and Dividend Suspension
The majority of the job cuts will be completed by the end of 2024, with CEO Pat Gelsinger stating that the company needs “less people at headquarters, more people in the field, supporting customers.” The dividend suspension is intended to focus on the balance sheet and deleveraging.
Turnaround Plan
Intel is in the midst of a turnaround plan, focused on developing advanced AI processors and building out its for-hire manufacturing capabilities. The company aims to recoup the technological edge it lost to Taiwan’s TSMC, the world’s largest contract chipmaker.
Financial Projections
Intel expects revenue of $12.5 billion to $13.5 billion in the third quarter, below market estimates. The company also forecast adjusted gross margin of 38%, short of market expectations of 45.7%.
Market Reaction
Intel’s shares slumped 20% in extended trade, setting the chipmaker up to lose over $24 billion in market value. In contrast, AI powerhouse Nvidia and smaller rival AMD ticked up after hours, highlighting their relative advantage in the AI market.
Analyst Insights
Analysts believe Intel’s plan to turn around the foundry business will take years to materialize, with TSMC expected to maintain its lead in the coming years. The company’s lagging position in the AI chip market has sent its shares down over 40% so far this year.
