Intel swings jobs axe on 1,000

Intel will begin cutting about 1,000 manager jobs worldwide this week as part of an effort to become more competitive.

Chief executive Paul Otellini told employees in a memo sent out on Thursday: "This step is important because it addresses a key problem we've found in our efficiency analysis: slow and ineffective decision-making, resulting, in part, from too many management layers."

An Intel spokesman confirmed the layoffs on Thursday, saying they would "both reduce costs and improve decision-making and communications". He didn't disclose the financial costs or benefits of the cuts but said Intel plans to share more details on Wednesday when it discusses financial results for the last quarter.

The restructuring and regrouping effort comes after two years of sluggish performance at Intel. In 2004, the company had to delay or cancel a number of products. In 2005, Intel steadily lost market share to rival AMD.

Martin Kariithi, an analyst at Technology Business Review, said: "Intel has been besieged by slowing PC market demand and uncharacteristically fierce competition from rival AMD. The primary concerns facing Intel's operations are declining revenues and profitability."

The move, along with the sale of some communications processor assets to Marvell Technology Group in June, is part of an efficiency review Intel launched in April to become more competitive. More cuts are likely as a result of the review, Otellini said.

He said in the memo: "You should expect that we will continue to take actions, including selective reductions, as we complete analyses and decisions about investments, expense levels and organisational structures. Over the last five years at Intel, the number of managers has grown faster than our overall employee population. Our efficiency analysis and industry benchmarking have shown that we have too many management layers, top to bottom, to be effective."

Kariithi estimated that the revenue per Intel employee dropped from $408,175 in the fourth quarter of 2005 to $371,075 in the first quarter of 2006 but he expects another layoff to be announced during the financial results announcement.

To return revenue per employee to where it was a year ago, Kariithi said, Intel will have to lay off 10 per cent of its staff - about 10,000 people.

Although AMD has been gaining share against its rival, it has had its own difficulties as well. Last week, the company announced revenue of $1.21bn, significantly less than the $1.3bn average expected by analysts and a nine per cent decrease over the first quarter.

Managers losing their jobs will get a minimum of three months' separation pay, Otellini said.

Henri Richard, executive vice president of sales and marketing at AMD, earlier this year said AMD made some of its gains in part because of Intel's complacency. Characterising Intel as fat and sluggish has become a recurring theme with AMD.

Michael Kanellos writes for CNET News.com