Intel is evolving from a PC company to one that serves the cloud and connected devices—and it’s losing 12,000 jobs as a result.
News of impending layoffs usually accompanies a severe downturn, but that wasn’t really the case: Intel reported net income of $2.0 billion, flat compared to a year ago, as well a 7-percent bump in revenue to $13.7 billion. (Analysts, though, expected Intel to report $13.8 billion and profits of 47 cents per share, versus the 42 cents per share Intel reported.) Intel also reported a $1.2 billion charge for the restructuring.
The key, though, was that Intel’s revenue was seemingly driven by everything but the PC. Intel’s Client Computing Group reported revenue of $7.5 billion, down 14 percent sequentially.
Chief executive officer Brian Krzanich laid out the changes in a memo, which the company cited. “Our results over the last year demonstrate a strategy that is working and a solid foundation for growth,” said Krzanich. “The opportunity now is to accelerate this momentum and build on our strengths.
“These actions drive long-term change to further establish Intel as the leader for the smart, connected world,” Krzanich added. “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.”
Why this matters: Intel’s statements don’t really come as a surprise, as the company began making the same noises about the transition away from the PC in January. Recently, analysts began predicting that chip sales would slow as tablet, phone, and PC sales all declined. Still, any shift by Intel away from the PC creates shock waves in Silicon Valley.
Into the cloud
Intel said its primary engines of growth will evolve from the PC to the data center and the Internet of Things, markets that power the cloud and billions of smart, connected computing devices. Intel’s Data Center Group reported a 9-percent year-over-year increase in revenue to $4.0 billion, while its IoT Group reported a 22-percent boost during the same period, to $651 million.
Intel’s other groups include the revamped Non-Volatile Memory Solutions Group, whose revenue fell 6 percent to $557 million, and Intel Security, which climbed 12 percent to $537 million.
Intel said that its current chief financial officer, Stacy Smith, will also transition out of his role into a new position overseeing sales, manufacturing and operations.
Intel said its layoffs will take place from now until mid-2017, via “site consolidations worldwide, a combination of voluntary and involuntary departures, and a re-evaluation of programs.” They'll save the company about $750 million this year, and $1.4 billion per year by mid-2017, Intel said.
We’ll find out more about what programs those might include when Intel holds a conference call later today.
Updated at 1:52 PM with additional details, and to correct an error in the headline.