Intel eyes cost cuts amid tough market

By Scott Hillis






SAN FRANCISCO - Intel Corp. said on Thursday it planned to slash costs in the face of shrinking market share and slowing computer sales, creating expectations the world's biggest microchip maker would cut jobs.





Intel Chief Executive Paul Otellini said he is launching a top-to-bottom review of the company's operations amid intense competition from rival Advanced Micro Devices Inc. 





"We are very well aware of the realities of our current and future business outlook and we are taking actions to address these realities," Otellini told an analyst meeting in New York that was broadcast over the Internet.





"No stone will remain unturned," Otellini said, adding that Intel would conclude the review in the third quarter.





That raised predictions the Silicon Valley bulwark, which employs nearly 100,000 people worldwide, could cut jobs and overhaul key parts of its business, which covers PC processors, memory chips, and other kinds of semicondutors.





"It sounds like job cuts is a piece of it and I think they are looking at whole business units, asking 'Is this efficient'?" said Credit-Suisse analyst Michael Masdea.





Intel has previously sought to reverse its sinking fortunes by touting an upcoming line of faster and more energy-efficient processors that should close the gap with AMD's chips.





Despite generally positive reviews of the new products, Intel's stock has languished, trading about 15 percent below where it was a year ago.





Facing an expected 3 percent fall in revenue this year, to $37.7 billion, Otellini said he is scaling back planned spending by about 8 percent, to a level roughly even with last year's $11 billion.





The news that Intel is getting serious about trimming the fat out of its business helped send its stock up 3 percent to close at $20.08 on the Nasdaq on Thursday.





"Intel acknowledged that they screwed up, that it's not a situation where they can introduce a new product and things are fine," said Hans Mosesmann, an analyst with Moors & Cabot.





Otellini also revealed details of Intel's technology roadmap, saying its microarchitecture -- the fundamental design of a chip -- would be overhauled every two years instead of every four years or so as in the past.





Intel is also on track to adopt ever-smaller manufacturing methods every two years, meaning it should be able to sell chips made at the 32-nanometer scale by 2010. The cutting edge now is 65 nanometer, and Intel plans to have 45-nanometer chips widely available in 2008.





The mix of new designs and manufacturing techniques could form a one-two punch that AMD, with less cash to invest in new facilities, would find tough to counter, Mosesmann said.





But Masdea cautioned that even if Intel wrested share back from AMD in server network computers, the gains could be offset if AMD made inroads in new areas such as high-end laptops.