Intel to cut 3000 after profits plummet 36 per cent

Intel to cut 3000 after profits plummet 36 per cent

As expected, Intel yesterday reported disappointing results for its first fiscal quarter, prompting the chip maker to announce staff reductions of up to 3000 employees.

However, Intel Australia's general manager, David Bolt, said it was too soon to tell what would happen in the local market.

"While it's a worldwide announcement, we don't expect any impact on Australian operations," he said in a statement.

Intel's net income in the first quarter, ended March 28, 1998, tumbled 36 per cent from $US2 billion in the same period a year ago to $US1.3 billion, the company said.

Revenues also were down, but not as much as Intel had warned they might be a month ago. Sales for the quarter totalled $US6 billion, down 7 per cent from the $US6.4 billion reported in the year ago quarter, and down 8 per cent from fourth quarter 1997 revenue of $US6.5 billion, Intel said.

In March the company said its revenues could be down sequentially as much as 10 per cent.

Intel attributed the shortfall primarily to weaker than usual demand for its processors by PC manufacturers.

"This was a disappointing quarter," Andrew Grove, Intel's chairman and CEO, acknowledged in a statement. "The PC industry seems to have gotten ahead of itself, building more product than end-customers purchased."

The situation is unlikely to improve until PC makers have whittled down a surplus of inventory currently filling their distribution channels, said Andy Bryant, Intel's CFO, in a teleconference with press and analysts. The inventory surplus means OEMs are not building as many new PCs, and therefore not buying as many Intel processors, he said.

The reduction in workforce will occur "largely through attrition", though some layoffs should be expected, particularly in the third quarter, Intel said.

Revenues were down sequentially in the Americas, Japan and Europe, but were up slightly in the Asia-Pacific, where sales were boosted by shipments of Pentium II chipsets to motherboard makers in Taiwan, Bryant said.

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