Intel Eyes New Business Plan

Mea culpa, Intel. Executives at the chip maker, in taking responsibility for the company’s poor performance of late, are making some changes.

Intel CEO Paul Otellini, speaking at the company’s annual financial analysts meeting in New York on April 27, hinted that the chip maker may reduce its 100,000-employee work force and jettison underperforming businesses between now and roughly the end of 2007, in addition to speeding up product launches, as it seeks to become more nimble.

The chip maker, which suffered a difficult 2005, during which it lost market share to its rival Advanced Micro Devices, is responding in several ways.

First, it has begun a broad self-evaluation. The plan, announced on April 19 but begun before that, will look at all of its businesses and ultimately lead to the restructuring and work force changes hinted at by Otellini.

The actions will come in addition to efforts to refresh its product line more often—in the short term, it will roll out a new crop of chips as quickly as possible and in the long term will reduce the time between chip architecture redesigns from four years to six years to two years. Intel will also be cutting budgets for 2006 spending areas, such as marketing, to the tune of about $1 billion as well as reducing capital expenditures, which are mainly for manufacturing.

Click here to read more about what Intel is doing to rebound after its recent lackluster performances.

“The result of this … is that you’ll see a leaner, more agile and more efficient company,” Otellini said. “No stone will be left unturned.”

The review, which comes after Intel reported lackluster first quarter 2006 financials and cut its revenue outlook for the year due to excess inventory, will look at every business.

The exact results of the review won’t be known until the action, scheduled to be completed within the next 90 days, is over. However, as Intel identifies areas that could be improved, it will take immediate actions, Otellini said.

Still, “in my mind, it would be way too simplistic to simply do a reduction in force,” Otellini said. “We don’t go into this knowing the answer. We don’t have a specific goal in mind.”

Thus Otellini, although he mentioned right-sizing the company—generally a euphemism for staff reductions of some sort—gave no specific information about job cuts.

Instead, he said Intel has a definite set of broad goals moving forward, in addition to looking at its businesses. One of them involves regaining its lost market-share. To do so, the company intends to accelerate the delivery of its Core Architecture chips—chips based on a new architecture design, which Intel believes will give it an advantage in performance and power consumption versus AMD—and move from 90-nanometer to 65-nanometer production as quickly as possible, this year.

Intel will start by rolling out its Core Architecture-based, dual-core Woodcrest server chip, originally expected in the third quarter, in June. It will follow with its Conroe desktop chip in July and its Merom notebook chip in August.

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