Chandler Intel job cuts likely

The shoe finally dropped at Intel Corp. Tuesday, five months after Chief Executive Paul Otellini ordered a top-to-bottom review of the company.

The bottom line: The semiconductor giant will eliminate 10,500 jobs worldwide — about 10 percent of its work force — to reduce expenses and focus on its core business of making microprocessors for servers and personal computers.

The number of job losses at Intel’s operations in Chandler, where the company employs about 10,900, was not immediately known. But spokeswoman Dawn Jones said some job cuts are likely.

“We can assume that employ- ees in Arizona will be impacted, but I don’t have a number,” she said.

The announcement will not affect construction of a $3 billion state-of-the-art wafer processing plant at Intel’s Ocotillo campus in south Chandler, which is still on schedule to open by the end of 2007, Jones said.

About 1,000 employees will work at the plant, called Fab 32, and those jobs could offset some of the losses at Intel’s other Chandler facilities, she said. Intel employs about 5,900 at Ocotillo and another 5,000 at its research and development campus at 5000 W. Chandler Blvd.

Most reductions this year will occur in management, marketing and information technology functions as well as through attrition and the sale of businesses already announced. In 2007, job losses will be more broadly based to help the company improve labor efficiency in manufacturing, improve equipment utilization, eliminate redundancies and improve productdesign

methods, Otellini said.

“These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come,” he said.

The Santa Clara, Calif.-based company said its worldwide work force will decline to about 92,000 by the middle of 2007 — 10,500 fewer than at the end of the 2006 second quarter.

The cuts include positions that will be shed as a result of the sale of business units to Marvell Technology Group and Eicon Networks as well as a reduction of 1,000 managers announced by the company in June. About 1,400 employees will be transferred to Marvell, including 400 in Chandler; and 600 — none in Chandler — will go to Eicon.

Intel expects to save about $3 billion in 2008 through the restructuring. The company also said it expects to avoid about $1 billion in capital expenses through more efficient use of equipment and space. Some of the savings will be offset by severance costs expected to total about $200 million.

Intel, the world’s largest chip-maker, has been under pressure to reverse sinking profits and regain market share lost to its rival, Advanced Micro Devices.

Will Strauss, a Tempebased market analyst, said the job cuts should improve Intel’s profit picture quickly, but the loss of market share to AMD is a longer-term problem.

“They have too much fat in the middle,” he said. “The big surprise to me is it’s not bigger. This is probably of little light on what Wall Street would want them to do.”

Dean McCarron, principal analyst at Mercury Research in Cave Creek, said the action is about what he expected. “The presumption is this is going to be enough based on their current business forecasts,” he said.

He said the cuts are needed to bring the company’s expenses in line with revenue. “It’s very unfortunate for anyone working for Intel whose job is lost, but it’s necessary to maintain their position in the business and maintain their expected profit margin. . . . They are making the painful cuts now to support the business in the future.”

- The Associated Press contributed to this report