Intel shares plummet after company announces plans to cut 15% jobs and suspend dividend in turnaround push.
Intel, the American technology company, on Thursday announced it plans to cut more than 15% of its workforce, which means that around some 17,500 of its employees would be sacked. The company also aims to suspend its dividend starting in the fourth quarter. Meanwhile, the chipmaker is now focusing on a turnaround regarding its money-losing manufacturing business.
Coming to the company's third-quarter revenue forecast, it is expected to be below market estimates. It is due to the fact that the company lags behind its rivals when it comes to its traditional data centre semiconductors and a focus on AI chips.
Meanwhile, in extended trade, shares of Santa Clara, California-based dipped 20%, and the company is set to lose more than $24 billion in market value. When the stock had closed down 7% on Thursday, it was in tandem with an overall plunge in U.S. chip stocks.
However, the broader chip industry is not affected by the results. AI powerhouse Nvidia and its smaller rival AMD soon picked up within hours, and clearly, they have an advantage of the AI boom – something that remains Intel’s disadvantage.
Regarding the issue of job cuts, CEO Pat Gelsinger told news agency Reuters, “I need less people at headquarters, more people in the field, supporting customers,” adding, “Our objective is to … pay a competitive dividend over time, but right now, focusing on the balance sheet, deleveraging.”
As of June 29, the company had 116,500 employees, excluding some subsidiaries. Now moving ahead, the job cuts would be implemented by the end of 2024. And it was in April this year that the company had declared a quarterly dividend of 12.5 cents per share.
Moving ahead, Intel is planning to develop advanced AI processors, and build its for-hire manufacturing capabilities. The company is now focused on having a technological edge over Taiwan’s TSMC, the world’s largest contract chipmaker.
Intel also has plans to cut costs, and it announced that it is looking to lessen capital expenditure by more than $10 billion in 2025. As of June 29, Intel had cash and cash equivalents of $11.29 billion with total current liabilities of about $32 billion. Since it remains at a lagging position in the market for AI chips, its shares have gone down more than 40% so far this year.
Nonetheless, while Intel has turned out its production of AI chips for personal computers, it will take years for its plans to materialise. Lastly, the company also has plans to slash investments, and cut down on its capital expenses by 17% in 2025 year-on-year to $21.5 billion.
