Intel to cut back

When Intel sneezes, the chip industry usually catches a cold. And this week,

Intel definitely showed it is feeling a bit "under the weather" in the

wake of the wobbly economy. The $34 billion Santa Clara chipmaker said it had

implemented a broad range of measures. Unlike rival Motorola, which announced it

is laying off 4,000 of its semiconductor workers, Intel’s measure still falls

short of layoffs. Instead the company is delaying pay raises, cutting back on

hiring and slashing spending.

Intel, whose stock has fallen to just $31 on Wall Street, said it expects to

save several hundred million dollars from the program. "The goal is to cut

back so we can continue in investments that can bring us through this

slowdown," said Intel spokesman Robert Manetta. Analysts said that Intel’s

moves are a clear sign that the current economic problems are not about to go

away. The company had not mentioned any plans for cutting expenses at its most

recent conference call with analysts a month ago. At the time, most were

expecting the lower interest rates to quickly pull the United States out of the

economic quicksand. But despite two 1/2 per cent cuts in the prime interest

rate, the economy continues to slide.

Intel’s budget for research and development and capital spending will stay

on target, but discretionary spending, such as overtime and travel expenses,

will be reduced by 30 per cent. And senior-level employees won't get their

raises until the fall, while non-managerial employees likely will receive half

of their 2001 raises in the spring and the other half in the fall.