Intel will reportedly announce plans this week to reduce its workforce by more than 20 percent in a move by CEO Lip-Bu Tan to cut down on what he has called “organizational complexity and bureaucratic processes” that have impeded the chipmaker.
Bloomberg reported Tuesday that Intel is making massive job cuts once again—after eliminating more than 15 percent of positions last year—to “streamline management and rebuild an engineering-driven culture,” citing an unnamed source familiar with the plan.
[Related: Intel CEO Lip-Bu Tan To Partners: ‘Please Be Brutally Honest With Us’]
The Santa Clara, Calif.-based company plans to report first-quarter earnings on Thursday. Intel had 108,900 employees as of last December, down from the 124,800 workers it had a year before that, according to its two latest annual reports.
Intel did not respond to a request for comment by press time.
Tan, who became Intel’s CEO last month, has made no secret about his desire to quash bureaucracy within the company in his bid to build a “new Intel” that will bounce back from multiple challenges, including a failure to gain traction in the data center accelerator chip market.
“Most importantly, we will simplify the way we work. Bureaucracy kills innovation. In my career, I [have seen] how small, focused teams move very fast and innovate and take on incumbents, and we’re going to practice that in Intel,” he said in his keynote at the Intel Vision 2025 event in front of partners and customers in late March.
Last Thursday, Tan made his first big move towards that goal by flattening the executive leadership team’s structure, according to a memo seen by CRN that was first reported on by Reuters. This involved making Intel’s business units, including the Client Computing Group and the Data Center Group, report directly to the CEO, among other changes such as the appointment of Sachin Katti as chief AI and technology officer.
“The number one thing we need to fix is our culture,” Tan wrote in the memo to employees. “It’s clear to me that organizational complexity and bureaucratic processes have been slowly suffocating the culture of innovation we need to win.”
Tan said the executive team “will be working together in the coming weeks and months to drive the cultural transformation needed to position our business for future success.” He added that Intel “will be transparent about any changes we make and the reasons we are making them.”
Intel Made Massive Job Cuts Last Year
The push by Tan to transform Intel comes after the company, under the leadership of former CEO Pat Gelsinger, announced last August that it would cut more than 15,000 jobs in a move to slash over $10 billion in costs. The main culprit then was worsening financial conditions.
“Our revenues have not grown as expected—and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low,” Gelsinger wrote last August.
Shortly after Gelsinger announced his cost-cutting plan, the company told Sales and Marketing Group employees that it would reduce the division’s costs by more than 35 percent, CRN reported at the time.
These cuts hit Intel’s global partner organization, which reduced direct partner coverage and reworked its market development funds while it increased overall partner funding, Intel Global Channel Chief Dave Guzzi told CRN in January.
Not long after Tan started as Intel’s new CEO last month, the leader of a systems integrator told CRN that he anticipated a “severe head count reduction.” He cited a Reuters report from last August that said Tan left Intel’s board of directors after clashing with Gelsinger and other board members over a “bloated workforce, risk-averse culture and lagging [AI] strategy.”
“They are definitely bloated,” said the systems integrator CEO, who asked to not be named to speak candidly.
A senior executive at a second systems integrator told CRN last month that he would like to see Intel become leaner and more aggressive based on recent interactions.
“There [are] just too many cooks in the [kitchen], and things just end up dying,” said the executive, who also asked to remain anonymous for the same reason.
The systems integrator executive cited issues with management-level employees when it comes to pushing projects through.
“They need to be lean, and they need to be aggressive. If they can do that, I think they can do good things. If they can’t, then they’re in big trouble,” he said.
