Lip-Bu Tan, the brand new CEO of Intel, despatched out a blunt message to workers saying the corporate has to reorganize to be extra environment friendly. He mentioned there can be a discount in workers, however he didn’t announce a precise variety of layoffs as anticipated.
Bloomberg reported that Intel is rumored to be getting ready to put off as many as 20% of its employees, which on the finish of 2024 was about 108,900 folks. A 20% lower would quantity to roughly 21,780 jobs misplaced. And whereas the adjustments Tan introduced in the present day might lead to appreciable job cuts that might begin within the second quarter, he didn’t spell out anticipated numbers.
Tan’s letter to workers coincided with the discharge of Q1 2025 quarterly numbers. For the earnings, Tan mentioned, “It was a step in the right direction as we delivered revenue, gross margin and EPS (earnings per share) above our guidance, driven by [former interim co-CEOs Dave Zinsner and Michelle Johnston’s] leadership. I want to thank them both, and all of you, for the good execution.”
However he rapidly warned, “We need to build on this progress — and it won’t be easy. We are navigating an increasingly volatile and uncertain macroeconomic environment, which is reflected in our Q2 outlook. On top of that, there are many areas where we must improve. We need to confront our challenges head-on and take swift actions to get back on track.”
“There is no way around the fact that these critical changes will reduce the size of our workforce. As I said when I joined, we need to make some very hard decisions to put our company on a solid footing for the future. This will begin in Q2, and we will move as quickly as possible over the next several months.”
In his letter, Tan mentioned Intel had not set any headcount discount goal.
“What we have set is a new non-GAAP operating expense target to approximately $17 billion in 2025, down from our previously stated goal of $17.5 billion, and $16 billion in 2026,” he mentioned. “There is no way around the fact that these critical changes will reduce the size of our workforce. As I said when I joined, we need to make some very hard decisions to put our company on a solid footing for the future. This will begin in Q2 and we will move as quickly as possible over the next several months.”
Tan’s view of Intel’s tradition
Intel is utilizing glass substrates to hurry up chip communication.
Tan inherited a tricky scenario as Intel has been dropping within the AI/graphics market to Nvidia and within the x86 processor market to Superior Micro Units. He didn’t mince phrases about criticizing Intel’s tradition as an enormous firm.
“As I have said, this starts by revamping our culture. The feedback I have received from our customers and many of you has been consistent. We are seen as too slow, too complex and too set in our ways — and we need to change,” he wrote.
He mentioned that the “flatter Executive Team (ET) structure that I shared last week was a first step.” The subsequent step is to drive better simplicity, velocity and collaboration throughout all the firm, he mentioned. And so he has adjustments coming. Amongst them: remaking the corporate’s AI technique, Tan mentioned in an analyst name. He additionally mentioned Intel’s monetary efficiency isn’t the place it must be and that Intel would scale back its capital spending.
He additionally mentioned Intel wouldn’t spin off Intel Capital and spend money on exterior firms. Intel is promoting 51% of its Altera programmable logic division to Silver Lake Companions. Altera has a worth of $9 billion, and in order that deal will generate appreciable money for Intel.
“We need to get back to our roots and empower our engineers. That’s why I elevated our core engineering functions to the ET. And many of the changes we will be driving are designed to make engineers more productive by removing burdensome workflows and processes that slow down the pace of innovation,” Tan mentioned.
To make essential investments in engineering expertise and know-how roadmaps, Intel wants to seek out new methods to cut back prices, he mentioned.
“While we have taken significant actions in the last year, our current cost structure is still well above competitive benchmarks. With that in mind, we have reduced our operating expense and capital spending targets going forward, which I will discuss during our investor call this afternoon,” he mentioned.
“As we refocus on engineering, we will also remove organizational complexity. Many teams are eight or more layers deep, which creates unnecessary bureaucracy that slows us down. I have asked the ET to take a fresh look at their respective orgs, with a focus on removing layers, increasing spans of control and empowering top performers. Our competitors are lean, fast and agile — and that’s what we must become to improve our execution,” he mentioned.
As a longtime chip engineer, it’s no shock that Tan is targeted on empowering engineers to do extra. He wrote, “I’ve been surprised to learn that, in recent years, the most important KPI for many managers at Intel has been the size of their teams. Going forward, this will not be the case. I’m a big believer in the philosophy that the best leaders get the most done with the fewest people. We will embrace this mindset across the company, which will include empowering our top talent to make decisions and take greater ownership of key priorities.”
He mentioned the corporate would empower smaller groups to maneuver quicker and make higher choices and cut back the variety of layers in the way in which. He mentioned Intel would steadiness reductions in opposition to the necessity to retain and recruit key expertise. He mentioned he would maintain the staff knowledgeable.
Streamlining processes
Intel has a bunch of recent Core processors coming at CES 2025.
Tan mentioned it has been eye-opening for him to see how a lot time and power is spent on inside administrative work that doesn’t transfer the enterprise ahead.
“We need to radically simplify this to maximize the time spent focusing on our customers,” he mentioned.
“I am instructing our leaders to eliminate unnecessary meetings and significantly reduce the number of meeting attendees. Too much valuable time is being wasted. We will also modernize processes with a focus on live dashboards and better data to ensure we have the real-time insights we need to make better and faster decisions,” he wrote.
One of many issues he’s making non-compulsory is Intel’s traditions of formal Insights and OKR necessities. He thinks staying accountable and absorbing suggestions could be achieved in a less complicated and extra versatile means.
He mentioned the corporate will return to work on the workplace 4 days every week, as an alternative of the present required three days every week on website. The four-day-in-office plan goes into impact on September 1, 2025.
He mentioned, “I realize this is a lot to take in, but we are playing from behind and we need to rally as a team to put ourselves in the best possible position to win.”
It’s fairly robust drugs, and never not like the robust insurance policies that Intel’s former longtime CEO, Andy Grove, would do.
A have a look at Intel’s Ocotillo chip fab.
I’m speaking concerning the alternative to basically reinvent an trade icon. To drag off a comeback that shall be studied in enterprise colleges for generations to return. To create new applied sciences and deploy them at scale to alter the world for the higher.
“Intel was once widely seen as the world’s most innovative company. There’s no reason we can’t get back there, so long as we drive the changes needed to improve,” Tan wrote. “It’s going to be hard. It will require painful decisions. But we will make them knowing it’s what we must do to serve our customers better as we build a new Intel for the future – and I have great confidence in the power of our team and our people to make it happen.”
In closing, he thanked workers “for everything you did in Q1.” In an analyst name, he famous he joined 5 weeks in the past. He changed the interim bosses in addition to former CEO Pat Gelsinger, who resigned in December 2024.
Tan mentioned his motto was to underneath promise and over ship, and he wouldn’t relaxation till Intel regained the belief of its prospects. Intel mentioned that tariffs will surely have an effect on its enterprise, partly due to the warning it might generate amongst prospects.
