News Intel CEO Announces Targeted Cuts in Wake of Lower Margins

[Admin]

Intel CEO Pat Gelsinger has communicated to employees that layoffs are imminent, on the back of high operational costs and lowered operating profits on the back of eakening demand and macroeconomic circumstances.

Intel CEO Announces Targeted Cuts in Wake of Lower Margins : Read more

 

[TechieTwo]

Why is it they never eliminate the CEO or other execs' salaries to reduce overhead? In many cases these folks actually receive multi-million dollar annual bonuses on top of their multi-million base salary even when their mismanagement has caused the company financial loses. Why should anyone be rewarded for incompetence?

 

[peachpuff]

Why is it they never eliminate the CEO or other execs' salaries to reduce overhead? In many cases these folks actually receive multi-million dollar annual bonuses on top of their multi-million base salary even when their mismanagement has caused the company financial loses. Why should anyone be rewarded for incompetence?

It's his first year, he's innocent...
But damn 20%? That's insane 🤯

 

[DougMcC]

Why is it they never eliminate the CEO or other execs' salaries to reduce overhead? In many cases these folks actually receive multi-million dollar annual bonuses on top of their multi-million base salary even when their mismanagement has caused the company financial loses. Why should anyone be rewarded for incompetence?

Because boards and CXOs are a team game playing against companies to siphon money. CXOs serve on boards of other companies, who serve as CXOs in turn. And it works because shareholder revolts are difficult to coordinate. A rational system would realize Pat has done a terrible job for Intel and that there are probably a dozen internal candidates (let alone external) who could replace him and do a better job.

 

[A Stoner]

Higher prices, lower margins. Better hope AMD does not lower prices on current and then release the 3D stacked versions...

 

[Kamen Rider Blade]

Because boards and CXOs are a team game playing against companies to siphon money. CXOs serve on boards of other companies, who serve as CXOs in turn. And it works because shareholder revolts are difficult to coordinate. A rational system would realize Pat has done a terrible job for Intel and that there are probably a dozen internal candidates (let alone external) who could replace him and do a better job.

Maybe there should be new regulations in place to outlaw such Cross Pollination that encourages this type of protectionism / fraternization / collusion.
Also outlaw "Golden Parachute" clauses.

Adopt a more Japanese style regulation where Pay gets cut from the top first before it goes down to the bottom.

 

[ikernelpro4]

Why is it they never eliminate the CEO or other execs' salaries to reduce overhead? In many cases these folks actually receive multi-million dollar annual bonuses on top of their multi-million base salary even when their mismanagement has caused the company financial loses. Why should anyone be rewarded for incompetence?

Maybe you don't want your folks in high positions earning pennies like everyone else, suddenly receiving job offers for 2-3x of the wage from competitors?

The worst thing that can happen is competitors snatching your clever folks away like other car manufacturers do with Tesla software engineers...

 

[prtskg]

This gives an entirely different spin to AMD, Nvidia and Intel's current price. While it's good Intel's processors are relatively cheap but to loose 20% of jobs due to that. I'm not sure which company's step is right.

 

[bit_user]

It's his first year, he's innocent...

Yeah, probably even if he weren't distracted courting politicians in the US and Europe, he might've had an impact at the margins, but there really wasn't much Intel could do about the revenue declines.

But damn 20%? That's insane 🤯

Depends on how targeted it is, as they said only certain divisions would be affected that much. If it were across-the-board, then that would indeed be a dire move.

 

[bit_user]

Because boards and CXOs are a team game playing against companies to siphon money. CXOs serve on boards of other companies, who serve as CXOs in turn.

Whatever you think of executive compensation, it doesn't cost nearly as much money as dividends and share buybacks. I agree that we need corporate governance reform, but we also should have higher taxation on these non-productive activities to discourage investors draining the lifeblood of the main engines of our economy. That would definitely help with international competitiveness.

A rational system would realize Pat has done a terrible job for Intel and that there are probably a dozen internal candidates (let alone external) who could replace him and do a better job.

Due to the extremely long lead times, in this business, I think it's too early to reach a verdict on his performance. In a couple more years, we'll begin to know whether he made the right strategic calls or not. However, some of the things he's been up to (i.e. fab plans & the foundry business) will have an even longer-term payoff than that.

 

[bit_user]

Maybe you don't want your folks in high positions earning pennies like everyone else, suddenly receiving job offers for 2-3x of the wage from competitors?

That's why the change needs to come from SEC regulations, so that it equally affects all companies.

The worst thing that can happen is competitors snatching your clever folks away like other car manufacturers do with Tesla software engineers...

I don't know too much about Tesla, but I've heard they have a culture of present-ism and overwork. Maybe they should treat their employees right, pay them fairly, and they won't have such a problem with losing talent.

 

[bit_user]

This gives an entirely different spin to AMD, Nvidia and Intel's current price. While it's good Intel's processors are relatively cheap but to loose 20% of jobs due to that. I'm not sure which company's step is right.

Intel has a history of paying out high dividends and doing stock buy-backs. Investors see this track record and they buy shares with the expectation it will continue. Some of what you're seeing is that Intel is forced to make internal cuts, because otherwise shareholders seeing fewer returns would be screaming for blood.

AMD had such a debt load that they haven't traditionally paid dividends or done stock buy-backs, but I doubt they'll be able to resist pressure to start, if they continue growing and performing as well as they have done.

 

[Unolocogringo]

Competition is good for us customers but not for Intel's employees. When margins go down employees lose their jobs.
Shareholders want their stock valuations and daddy needs a new yacht.
The little guy always looses.

 

[Deleted member 2783327]

Ok, may be costs are higher. Probably not as high as he's alleging, but lower margins? Not likely, All Intel product prices here are still skyrocketing and don't look like slowing down. I doubt the retailers are making much bigger margins.

 

[zoridon]

I believe Pat G is making the right moves. Intel for to long sat on their superiority and did not innovate. we had over half a decade of only 5 percent ipc improvements per generation of intel chip. AMD was able to capitalize on this and came back from the abyss. Pat needs 2 to three years to turn things around and he is making the right decisions in my opinion. This is not a over night improvement Chip manufacturing lead time is years on the making. If I were not invested in companies making weapons of war I'd go long on Intel right now "like 5 years".

 

[prtskg]

Ok, may be costs are higher. Probably not as high as he's alleging, but lower margins? Not likely, All Intel product prices here are still skyrocketing and don't look like slowing down. I doubt the retailers are making much bigger margins.

Intel is undercutting AMD in cpu space and AMD and Nvidia in GPU space. So lower margins could be true, definitely not the way he shows but it's there. He seems to have a habit of exaggerating.

 

[Unolocogringo]

Before Ryzens arrival top end Intel CPUs were always $1000 +.
Now a 12900k cost $500-600. A 50% reduction in price. So margins are a lot less than just a few years ago.
When Ryzen matched or beat Intel in performance, AMD was able to raise prices to match intel.
So Intel lowered prices to become viable again and reduce AMDs margins.
So we as consumers can thank AMD for lower prices overall.

 

[bit_user]

Competition is good for us customers but not for Intel's employees. When margins go down employees lose their jobs.

It's not primarily competition that caused the bulk of the shortfall. That has more to do with macroeconomic conditions. For a long time, Intel (and their employees) have fared well on things like the unprecedented boom in demand. The pendulum is now swinging the other way.

The semiconductor business is cyclical. This has always been true, even if the cycle that's now ending has gone on far longer than most.

Competition is ultimately good for companies, because it forces them to sharpen their focus and use resources efficiently. Unless a company is somehow permanently protected from ever having to compete, continual competitive pressure is needed to keep them primed to face new challenges and adversaries. For instance, let's imagine AMD stayed in the doldrums and Intel continued just turning the crank and delivering single-digit gen-on-gen performance increases. Then, almost out of nowhere, ARM could swoop in and blow Intel out of laptops and the datacenter - both essential markets, for them.

Or, let's say ARM has gotten complacent about the microcontroller market. RISC-V is now really starting to bite into their share of that market.

One unique challenge Intel is facing, that their competitors don't, is the boat anchor of their fabs. In the good times, fabs have been a strategic asset, ensuring access to production volume and helping to improve margins. In the bad times, those fabs continue to cost loads of money, which takes a huge bite right out of Intel's profits. That's why I think Intel is doing the whole Foundry Business, and ultimately wants to spinoff their fabs, like AMD did ~15 years ago.

Shareholders want their stock valuations and daddy needs a new yacht.
The little guy always looses.

But that's capitalism. The fortunes of the company tend not to have much impact on the typical employee. They do well when the labor market is tight - that's the main factor. However, employees are a cost and businesses are always trying to minimize costs.

 

[bit_user]

Ok, may be costs are higher. Probably not as high as he's alleging, but lower margins? Not likely, All Intel product prices here are still skyrocketing and don't look like slowing down. I doubt the retailers are making much bigger margins.

You only see a small slice of Intel's pricing. Most of their sales are to big OEMs and datacenters. And especially on the latter point, the delays around Ice Lake SP and Sapphire Rapids have got to be hurting them badly. When Ice Lake SP launched, it was notable they did not increase prices and had less segmentation between their product tiers. That was a product of two factors: AMD's strength, and a weaker-than-expected Ice Lake offering going up against an extra generation tuned 14 nm CPUs that it wasn't expected to compete against.

As for the big PC OEMs, I'd imagine they try to put the squeeze on pricing, when demand sags. For a long time, they were limited by supply constraints and haven't had much leverage. Now, the tables have turned.

 

[bit_user]

Before Ryzens arrival top end Intel CPUs were always $1000 +.

That's an apple-and-oranges comparison. Theses $1000+ CPUs were HEDT, which had a different socket, more memory channels, and more PCIe. In other words: workstations. Those still exist, but Intel hasn't been doing consumer-oriented versions. Instead, they've started relaxing overclocking restrictions on some of their Xeon W CPUs.

On the flip side, they recently skipped a generation of Xeon E-series products, instead enabling higher-end Alder Lake desktop CPUs to be used in entry-level workstation boards.

Now a 12900k cost $500-600. A 50% reduction in price.

You should stick to comparing CPUs based on socket + product tier. So, compare a i9-9900K with an i9-12900K, for instance. Both fit mainstream desktop sockets and have 2 memory channels.

So margins are a lot less than just a few years ago.

You remind me that Intel's CFO did warn their 10 nm process family would be less profitable than their old 14 nm node.

Intel CFO: Our 10nm Will Be Less Profitable than 22nm [Morgan Stanley Transcription]

www.anandtech.com

When Ryzen matched or beat Intel in performance, AMD was able to raise prices to match intel.
So Intel lowered prices to become viable again and reduce AMDs margins.

There's some true to this, if you look at the $/mm^2 that Intel charged for their 14 nm CPUs, from Skylake to Rocket Lake. Obviously, they will have optimized their 14 nm to improve yield and reduce various costs, but I could believe their later 14 nm CPUs were less profitable for them, as they had to add in more and more cores for somewhat similar price points.

So we as consumers can thank AMD for lower prices overall.

Um, I think it's really $ per core that decreased. As Intel added cores, they did increase prices, just not proportional to the number of cores. Again, I'm just looking at 14 nm CPUs, because that's a fairly direct comparison.

 

[TerryLaze]

...Or it could just be normal housekeeping.
I mean they did close down optane, they opened up dGPU, and who knows what else they closed and opened, so it makes sense for them to look everything over and see what they should shuffle around and what to drop to make them more efficient.

It's like using your harddrive for a few years, it's a good idea to delete all the useless files you gathered and to run a defrag. Doing these things doesn't have to mean that your HDD is dying, and that's why you do them.

 

[bit_user]

...Or it could just be normal housekeeping.

If it were "normal housekeeping", it wouldn't warrant an announcement by the CEO. Keep in mind that this comes on the heels of an unprecedented revenue shortfall. There's definitely nothing normal about it.

I mean they did close down optane,

I'm pretty sure the new cuts aren't counting people dropped when Optane was terminated. I think the hammer probably fell swiftly on those folks, because as soon as you cancel a program, it makes zero sense to have people stick around and keep working on it. They probably kept just a skeleton crew to do maintenance & support work (although they might've been transferred over to Solidigm).

At least the cuts don't seem to have affected some people we know...

 

[TerryLaze]

If it were "normal housekeeping", it wouldn't warrant an announcement by the CEO. Keep in mind that this comes on the heels of an unprecedented revenue shortfall. There's definitely nothing normal about it.

I don't know for what occasions CEOs do video calls, it's a video call it's not that much effort.
And also it's one bad quarter, not a bad 4-5 years.
It's not like they ran out of money because of one quarter and have to cut people.

I'm pretty sure the new cuts aren't counting people dropped when Optane was terminated. I think the hammer probably fell swiftly on those folks, because as soon as you cancel a program, it makes zero sense to have people stick around and keep working on it. They probably kept just a skeleton crew to do maintenance & support work (although they might've been transferred over to Solidigm).

At least the cuts don't seem to have affected some people we know...

My point is that in a big company a lot of things are interconnected, there might be dozens of people in dozens of departments there where linked to the businesses that got dropped and that now don't have enough to do to keep them on or to keep them in the same position.

 

[kjfatl]

I believe Pat G is making the right moves. Intel for to long sat on their superiority and did not innovate. we had over half a decade of only 5 percent ipc improvements per generation of intel chip. AMD was able to capitalize on this and came back from the abyss. Pat needs 2 to three years to turn things around and he is making the right decisions in my opinion. This is not a over night improvement Chip manufacturing lead time is years on the making. If I were not invested in companies making weapons of war I'd go long on Intel right now "like 5 years".

A lot of the problems that Intel is having now are the direct result of a previous CEO laying off a large number of 'expensive' experienced process engineers, replacing them with cheaper kids (<35 years old) with newly minted degrees. This resulted in Intel having manufacturing processes that worked great in PowerPoint but not so good in volume production. I hope the new CEO doesn't go town the same path and doom the company.

 

[Deleted member 14196]

That’s how it is in business. Put you out to pasture when they think you make too much. So they can earn billions