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Intel to Cut 3000 Jobs After Profits Plummet 36 Percent

Disappointing first-quarter results include 7-percent overall drop in sales.

By James Niccolai, PCWorld   

Intel%squots net income in the first quarter, which ended March 28, tumbled 36 percent from $2 billion in the same period a year ago to $1.3 billion, the company said.

Revenues also were down, but not as much as Intel had warned they might be a month ago. Quarterly sales totaled $6 billion, down 7 percent from the $6.4 billion reported last year for the quarter, and down 8 percent from the fourth-quarter 1997 revenue of $6.5 billion, Intel said. In March the company said its revenues could be down sequentially as much as 10 percent.

Intel attributed the shortfall primarily to weaker-than-usual demand for its processors by PC manufacturers.

%dquotThis was a disappointing quarter,%dquot Andrew Grove, Intel%squots chair and CEO, acknowledged in a statement. %dquotThe PC industry seems to have gotten ahead of itself, building more product than end-customers purchased.%dquot

The situation is unlikely to improve until PC makers have whittled down the surplus of inventory currently filling their distribution channels, said Andy Bryant, Intel%squots CFO, in a teleconference with the press and analysts. The surplus means OEMs are not building as many new PCs, and therefore not buying as many Intel processors, he said.

As a result, Intel expects revenues for the second quarter to be flat or slightly down from the $6 billion reported today, while sequential revenue growth is unlikely to resume until the second half of 1998, Bryant said.

The reduction in workforce will occur %dquotlargely through attrition,%dquot though some layoffs should be expected, particularly in the third quarter, Intel said. %dquotWe got ahead of ourselves in terms of adding heads and capital spending, so what we%squotre trying to do is take a breath and let business build back up,%dquot Bryant said.

Intel shrugged off suggestions that competitors like Advanced Micro Devices could eat into Intel%squots share of the market if they are able to meet volume targets with lower-priced chips. Intel %dquotfights a battle for every deal%dquot it wins with an OEM, and the company will continue to enjoy its lion%squots share of the PC business, Bryant said.