By Senad Karaahmetovic
Intel Corp . (NASDAQ:INTC) is looking to make major staff cuts in the coming period, Bloomberg News reported citing people with knowledge of the situation.
The chipmaker plans to announce cost-cutting measures this month, somewhere around its Q3 earnings report that is scheduled for October 27. Intel could cut up to 20% of staff in certain divisions, like marketing and sales.
At the end of Q2, Intel reported it employed nearly 114,000 people. CEO Pat Gelsinger warned on the Q2 earnings call that Intel may take “additional actions” in the second half of the year to lower costs.
Cuts are needed to offset a significant slowdown in demand for PC processors, Intel’s key business area. Moreover, analysts highlighted in recent months that Intel continues to lose its market share to AMD (NASDAQ:AMD). As a result, analysts are looking for revenue deceleration of almost 20% for Q3.
Separately, the WSJ reported that CEO Gelsinger is pushing to further separate its design and manufacturing teams.
BofA analysts see both steps as “necessary, but they would be insufficient to change our fundamental concerns around core strategic, competitive and financial risks.” They believe headcount reduction could expand CY23 net income by $1.3 billion.
“The media reports of potential cost cuts coupled with AMD’s recent PC-related warning suggests greater downside risk to INTC’s Q4 and CY23 estimates. However, under our current estimates, a 20% cut to CY23E marketing and sales expense could expand CY23 net income by $1.3bn and pf-EPS by 32c (+13% increase),” they said in a client note.
Citi analysts said earlier this week that the downturn in the PC market will continue to negatively impact both AMD and INTC.
“We believe there is more downside to the consensus estimates given collapsing PC demand. Our C22 and C23 estimates on both are below the consensus,” they added in a client note.
Citi’s 2023 EPS projections for Intel are as much as 25% below the Street.
Intel shares are up about 1% in pre-open Wednesday.