Employees of Intel Corp., the East Valley’s largest private-sector employer, have reason to be nervous about losing their jobs. Media reports of upcoming layoffs intensified Friday with the latest reported figure reaching 20,000. Dean McCarron, principal analyst at Mercury Research in Cave Creek, has been expecting the layoffs.
“There was essentially an announcement that was made at a shareholders’ meeting back in late spring that they would be evaluating pretty much all their operations, looking for places to cut back,” he said.
“Intel has done this several times in the past as well, where they do what amounts to a 10 percent layoff in order to basically improve the company’s bottom line and profit margin.”
Intel has about 10,900 employees at its two operations in Chandler, said spokeswoman Dawn Jones.
The employees are evenly split between the fabrication facility in Ocotillo and the main campus on Chandler Boulevard, she said.
“There is no confirmation of anything,” she said. “We are updating the employees on our structure and efficiency efforts on Tuesday. There’s going to be a webcast and that’s the only thing that we’re doing. That is all speculation in the media.”
In July, Santa Clara, Calif.-based Intel reported second-quarter net income of $885 million, down 56.6 percent from the $2.04 billion in the same quarter a year ago.
Back in April, CEO Paul Otellini said he was “revamping” the company and “looking at it at all levels, and setting up some teams to take a look at how we’re operating and how we can be more efficient,” Jones said.
“He said he would have an update and he has been updating the employees throughout the process,” she said. “We have cyberchats, we have different things, and Tuesday’s announcement or webcast is just one of the ways that he keeps in touch with employees. It’s pretty much an update on what the findings are, what the teams came up with, and how we can make our work force and our operations more efficient.”
Intel is under increasing competitive pressure as its primary competitor, Advanced Micro Devices, has been taking market share from the company during the past three years, McCarron said.
“In the past year in particular the impact has been a little bit more significant,” he said. “As a result of that, and also the result of 2005 being a very strong year for the processor business and 2006 not being so strong, it kind of set up the situation where this kind of cut was becoming apparent as far as the need for it.”
The job cuts should be across all product lines and all possible operating divisions of the company, McCarron said.
“Given the size of the cut that is being discussed, I would imagine that there would be some local impact,” he said. “Now Intel does tend to be a little bit more protective of its manufacturing operations, so they’d likely be hit less hard than say marketing maybe. But at the same time, this is likely going to be something that’s broad-based, so presumably we would see at least some activity here in Arizona.”
The layoffs aren’t expected to be part of a drastic change in the way Intel operates and conducts business, McCarron said.
“They only thing that they’ve done that is a departure from its previous history is . . . they have three product lines and previously they had two,” he said. “Beyond that, they have found a formula that has largely worked for them and they’ll likely continue to do that. The main difference now is that they do have a stronger competitor and they have to be a little more reactive to how that changes the market conditions.”
Intel’s stock, traded on the Nasdaq, closed at $19.88 a share Friday, up 1.58 percent, on volume of more than 68.2 million shares.