Intel's 15% Workforce Cut and Dividend Suspension Signals Radical Turnaround Effort

Intel is set to cut over 15% of its workforce and suspend its dividend starting in Q4, focusing on a turnaround of its struggling manufacturing sector. CEO Pat Gelsinger aims to reduce capital expenditures and operating costs to regain market position. Shares fell sharply following the announcement.

(Adds details on dividend, capital expenditures) Aug 1 - Intel announced a major restructuring effort on Thursday, including a 15% workforce reduction and suspension of its quarterly dividend, amid efforts to revamp its loss-making manufacturing division.

Intel's share value plummeted 20% in extended trading, shedding over $24 billion in market value. The drop follows an already tough week for U.S. chip stocks, worsened by a conservative outlook from Arm Holdings.

Most job cuts are expected to be completed by the end of 2024, affecting a significant portion of Intel's 124,800 employees worldwide. CEO Pat Gelsinger emphasized the need for a smaller headquarters team and increased field support.

Seeking to slash operating expenses and capital costs by over $10 billion by 2025, Intel faces steep challenges as it aims to compete with Taiwan's TSMC in manufacturing capacity. The company's lag in AI chip development has also contributed to a 40% drop in share prices this year.

Intel plans future capital expenditures to range between $25 billion and $27 billion for 2024 and $20 billion to $23 billion in 2025. In 2023, the company spent $25.8 billion on capital expenditures.

Despite efforts to revive growth, Intel's third-quarter revenue projection fell short of analysts' expectations, estimating between $12.5 billion and $13.5 billion, as it copes with reduced spending on traditional data center chips and heightened PC market competition.

(With inputs from agencies.)