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Analyst: Intel could cut 10% of headcount

Posted: 09 Dec 2008     Print Version  Bookmark and Share

Keywords:headcount  cost-cutting measures  job cuts 

Craig Berger, an analyst for FBR Capital Markets expects Intel Corp. to cut 6 to 7 per cent of its total headcount, or roughly 5,000 to 6,000 employees, as part of a series of cost-cutting measures that could save the company as much as Rs.5,003.64 crore ($1 billion) annually.

Intel could actually cut as much as 10 per cent of its headcount, including manufacturing and non-manufacturing jobs, said the analyst.

Based on the magnitude of competitor Advanced Micro Devices Inc.'s announcement Thursday that it expects fourth quarter revenue to be off 25 per cent from third quarter, Berger said there is increased risk that Intel would cut its revenue outlook further from the company's Nov. 12 revision, when it provided a revised range of down 9 to 15 from the third quarter.

"We do think that Intel's product roadmap is much stronger than AMD's, possibly allowing it to outperform its competitor," Berger wrote.

In September 2006, Intel outlined 10,500 job cuts. In the company's most recent earnings call in mid-October, Intel executives touted these job cuts as one reason Intel was lean enough to weather the emerging economic storm.

Berger expects Intel to further cut costs by announcing there will be no "focal" raises this year. Employee bonus payments, which are largely based on profitability metrics, will be down in 2008 and 2009, he said.

Asian distributors are depleting chip inventories below sustainable levels in order to hoard cash, Berger wrote. He said chip firms could see revenues snap back in the second or third quarter of 2009 as as customers replenish inventories.

FBR lowered its 2009 revenue estimate for Intel to Rs.171,624.82 crore ($34.3 billion) from Rs.175,627.73 crore ($35.1 billion), its earnings per share estimate to 85 cents from 95, and its price target for Intel shares to Rs.775.56 ($15.50) from Rs.850.62 ($17). FBR maintained a "market perform" rating on the stock.

-Dylan McGrath
EE Times

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