Intel announced it will cut up to 12,000 positions globally, representing about 11 per cent of its employees, as it shifts resources towards the cloud and the Internet of Things (IoT) and away from its historic PC business.

However, the chipmaking giant struggled with past transition to the smartphone revolution, an omission for which it is still paying.

Now, it wants to increase investments in its data centres, IoT, memory and connectivity businesses.

The shift in emphasis requires a redundancy programme, said Intel, which will run its course by mid-2017. The redundancies will be made up of site consolidations globally, voluntary as well as involuntary departures, and a re-evaluation of programmes.

The company expects the programme to deliver $750 million in savings this year and annual run rate savings of $1.4 billion by the middle of next year. The company will record a one-time charge of approximately $1.2 billion in the second quarter for the job losses.

The company reported Q1 2016 sales that were down 8 per cent to $13.7 billion compared to the same quarter last year. Net income was down 43 per cent to $2 billion.

Intel also lowered its full-year outlook, from a revenue growth of mid to high-single digits to mid-single digits.

Gloomy analyst forecast
“Intel has been struggling in mobile for 15 years despite vast investments and the ARM processor remains a much better proposition for many of the segments that Intel is hoping to address,” wrote Radio Free Mobile’s Richard Windsor in a research note.

“The job reductions are clearly aimed at realigning Intel to the new reality it faces as well as preserving its superb profitability until the other business lines can be brought up to speed. With Intel’s history outside of its core markets, this will be a big ask and with ARM finally having a credible go at the server market, the immediate term outlook remains very difficult.”