Intel Corp. to cut 4,000 jobs

By Matthew Fordahl, The Associated Press
Wednesday July 17, 2002

SAN JOSE — Intel Corp., which has managed to avoid mass layoffs during the technology downturn, said Tuesday it’s cutting 4,000 jobs as the chip-making giant posted disappointing second-quarter earnings. 

The world’s largest semiconductor company said continuing softness in demand for the chips that power personal computers prompted the 4.8 percent reduction in its work force. 

“We haven’t seen an economic recovery in our business yet,” said Andy Bryant, Intel’s chief financial officer. “We want to be cautious in our spending.” 

As was the case a year ago, when 5,000 jobs were cut, most of the reductions will be made through attrition, Bryant said in an interview. 

For the three months ended June 29, the company said it earned $446 million, or 7 cents a share, compared with profits of $196 million, or 3 cents a share, in the same period last year. 

Excluding acquisition-related costs, the company earned $620 million, or 9 cents a share, compared with earnings of $854 million, or 12 cents a share, last year. 

Sales were $6.32 billion, slightly lower than the $6.33 billion reported a year ago. 

Analysts were expecting second-quarter profits of 11 cents per share on sales of $6.35 billion, according to a survey by Thomson Financial/First Call. Intel said analyst estimates do not include a $106 million charge announced last month to close Intel Online Services, its Web hosting service. 

Intel had 83,000 employees worldwide at the end of the first quarter, down from 86,000 at the end of 2000. 

Unlike other high-tech firms over the past year, Intel escaped massive layoffs. Instead, the company did not fill vacant positions, slashed discretionary spending such as travel and delayed raises. 

Executives said past downturns had shown that companies could not cut and save their way through a recession and be prepared for an upturn at the other end. 

But in October, chief executive Craig Barrett told employees that the company’s headcount was 20,000 higher than it was in 1999 even though revenues remained roughly the same. 

“On the whole, it’s not as bad as it could have been,” said Douglas Lee, an analyst at Banc of America Securities. “Hopefully, the stock starts to stabilize at this point. (The second-quarter announcement) is not great but not a disaster.” 

Intel did not disclose where the cuts were to be made, said Eric Ross, an analyst at Investec. He said if they were from Intel’s core microprocessor business, it would be a sign of no confidence in a recovery. 

But, he added, the cuts would be appropriate in Intel’s flash memory and networking divisions, which are not expected to recover anytime soon. 

Earlier this month, Intel warned that it would not meet previous its previous sales forecast of $6.4 billion to $7 billion, lowering the range to between $6.2 billion and $6.5 billion. 

At the time, it blamed lower-than-expected sales on soft demand for PC processors in Europe. 

For the third quarter, the company expects sales to be between $6.3 billion and $6.9 billion, within the range of analysts’ estimates. 

Rival Advanced Micro Devices Inc. issued two warnings last month that its second-quarter sales would not meet expectations. AMD is expected to release its earnings after the markets close Wednesday. 

Shares of Intel closed down 76 cents, or nearly 4 percent, to $18.36 in Tuesday trading on the Nasdaq Stock Market. After the announcement, shares gained 26 cents in the extended session.