Intel to Slash Spending, Hiring to Cut Costs
Intel Corp. said Tuesday it will delay raises, cut back on hiring and slash spending, joining other high-tech companies in belt-tightening amid a slowing economy and sluggish personal computer sales.
The $34-billion chip-making company hopes to save “hundreds of millions of dollars” with the cost-cutting measures, Intel spokesman Robert Manetta said. Layoffs are not part of the plan.
The cutbacks did not surprise industry analysts, but the fact that the tech titan did not discuss the cost-cutting measures during its earnings report last month may mean the industry’s outlook for the year remains bleak.
“We’re seeing the belt tighten another notch. It’s slight, but it’s incrementally bad news for the overall sector,” said Dan Scovel of Needham & Scovel Inc. “Something prompted them to do this; a sign of recovery may not be on the horizon at this point.”
Intel, which employs about 86,000 people worldwide, said it will limit hiring to only “critical positions” and pare its work force through attrition. The company’s attrition rate is typically in the single-digit range, Manetta said.
The budget for research and development and capital spending will stay on target, but discretionary spending, such as overtime and travel expenses, will be reduced by 30%, the company said.
Intel also will delay springtime raises until October--when company officials hope to see a bounce-back in the economy and technology purchases, Manetta said.
Also, Intel will defer its free-PC program until 2002 for salaried employees who have yet to receive a home computer. Hourly employees have the option to get their free PC now or wait for a more powerful one.
Senior-level employees won’t get their raises until the fall, while nonmanagerial employees probably will receive half of their 2001 raises in the spring and the other half in the fall, Manetta said.
Intel is the latest to pare expenses amid diminishing personal computer sales and a slowing economy.
Last week, Motorola Inc. announced plans to eliminate as many as 4,000 jobs from its semiconductor operations by year’s end.
Also last week, Dell Computer Corp. slashed 1,700 jobs, about 4% of its work force. Last month, Gateway announced plans to cut 10% of its work force and Hewlett-Packard Co. said it would cut 2% of its work force.
Driven by the expansion of the Internet and demand for communications equipment, worldwide sales of semiconductors topped $200 billion in 2000, but record-setting sales were not expected to carry over into 2001 as the economy continues to slow and manufacturers report an excess of inventory, according to the Semiconductor Industry Assn.
December sales were $17.9 billion, a 21.6% increase over 1999 but a 2.1% drop from November. The industry group said its 2001 forecast of 22% year-over-year growth probably will not be met.
Shares of Santa Clara, Calif.-based Intel closed down $2.94, or 8.5%, to close at $31.44 on Nasdaq. The decline was sparked by comments from Salomon Smith Barney analyst Jonathan Joseph, who said a semiconductor recovery in the second half of the year is “overly optimistic.”
Intel stock slipped 6 cents to $31.38 a share in after-hours trading.
