Intel To Lay Off 1000 Managers

sprash writes to mention a Forbes article about an Intel cost-cutting measure. In response to stiff competition from AMD, the company is laying off 1000 managerial positions. From the article: "In April, Intel reported a 38 percent drop in first-quarter profit as demand slackened for PCs and microprocessors from AMD continued to steal market share. That same month, Chief Executive Paul Otellini vowed to spend the next 90 days identifying underperforming business groups and cost inefficiencies in an effort to save the company $1 billion a year. He said he planned to make changes as his analysis progressed, rather than waiting until the end of his review."

Pink slips already handed out

[Anonymous Coward]

At least one person I know personally has lost his job in this round of layoffs. He had been with the company for 27 years (before they even started making processors).

10% cut?

[kripkenstein]

TFA says:

... predicting Intel would reduce its work force by more than 10,000 employees

and

...Intel had about 100,000 employees

So, the 1,000 managers will be followed by some 9,000 more, for a total of about 10% of the workforce - if the predictions / estimations are correct. If so, then this is very significant.

I personally know three people who worked at Intel, one who still does. All worked in the same division, so this isn't a representative sample. But all of them saw money thrown around quite freely, including on hardware and on salaries (which are among the highest in the area here). I hope they tried to cut other things before they started firing.

Re:Where are those anti-trust advocates now?

[merreborn]

It takes enourmous amounts of capital, and even more importantly, reputation to compete in the processor space.

Damn straight -- startup costs in that industry are measured in billions of dollars. AMD's new plant [com.com] is going to cost them $3.2 billion.

Here is the internal email...

[Anonymous Coward]

Here is the internal email from Intel CEO sent to all top level managers. This is sourced from a relative that has been working there since the 1970's.

------

From: Otellini, Paul
Sent: Thursday, July 13, 2006 8:14 AM
Subject: An important and difficult step: Manager reductions

To: All Intel employees

This week we're taking an important and difficult step in our efficiency project: reducing the number of Intel managers by about 1,000 people worldwide. Only managers, ranging from senior to first-line, are affected. This step is important because it addresses a key problem we've found in our efficiency analysis--slow and ineffective decision-making, resulting, in part, from too many management layers. It is difficult because the managers who will leave the company are our colleagues and friends, and since we have limited internal job opportunities, redeploying their skills is not a viable option.

We are notifying the majority of impacted employees on Thursday and Friday this week, and (except where a country's laws require different steps and timelines) we plan to have all affected employees informed by Monday, July 17. In the U.S., most employees' last day of work will be July 28, and their benefits will include a minimum of about three months' separation pay (and more for lengths of service over two years). In other regions the process and benefits will differ. While we can't eliminate the impact to these employees, we're committed to offering them support during this difficult time.

This manager reduction is one of the first major actions coming out of our structure and efficiency project, and I believe it's an essential first step toward making us more competitive. Over the last five years at Intel, the number of managers has grown faster than our overall employee population. Our efficiency analysis and industry benchmarking have shown that we have too many management layers, top to bottom, to be effective.

In addition, this finding is consistent with what our organizational health surveys have suggested: that the relative increase in management has impaired decision-making and communication, reducing the company's efficiency and productivity. Many of you have made the same point in your individual inputs to the efficiency team.

As I've said in previous Webcasts, one of the outcomes of the structure and efficiency project is that we'll be a leaner and more agile company. We'll make quicker decisions, collaborate better across the company, and enable a cost structure that allows us to continue to win in our extremely competitive industry as it evolves.

This manager action is one step along that path. Another was the decision to sell our communications and applications processor business to Marvell. We'll continue to identify other opportunities, act on each one as soon as we can, and tell you about the changes as soon as possible. I'll talk more about this and our business priorities in my employee Webcast on July 19 at 4 p.m. Pacific time.

In April I said that we had decided not to do an immediate "across the board" layoff, because that would be reactionary - focused only on the current environment rather than the long term strategic needs of our company. Instead, we chose to undertake a longer, more comprehensive project to analyze all of our operations and make strategic, data-driven decisions. That is still our plan. This manager reduction was the result of careful assessments of the management and leadership roles we need for our future success. We are in the process of fundamentally changing our behaviors and our structure for where our business and industry are going. You should expect that we will continue to take actions, including selective reductions, as we complete analyses and decisions about investments, expense levels and organizational structures. You should also keep in mind that at the end of this process we will still be the largest and most profitable semiconductor company on earth. Our actions are focused on ensuring tha

Re:Where are those anti-trust advocates now?

[Sebastopol]

Are you seriously comparing IBM and Atari? Seriously!?!

IBM is a CENTURY old old, a market cap bigger than Intel -or- GM, still a value giant with massive capital and a solid product base (which to its credit completely shifted its service division to nimbly adapt to 80/90's technology shift), and shows no sign of going away.

AMD nixes GEODE too

[Sebastopol]

Apparently my submission was rejected, but AMD cut 1,000 folks too, include GEODE!

http://www.theinquirer.net/default.aspx?article=32 991 [theinquirer.net]

Re:IANAIM

[Anonymous Coward]

I am not an Intel manger either, but I am an Intel employee, and was a first level manager until quite recently.

I had less than half a dozen people working for me throughout my entire multi-year tenure as an Intel manager, which was fine by me: I could give them all the attention they needed and it didn't consume more than 30% of my time, so I could STILL do my full-time individual contributor job, which is what's expected of first level managers at Intel.

I was, as most first level managers are, a working manager. What concerns me most about this move is the assertion that we're losing about 1000 managers. We're probably only going to lose about 700 FTE's of management work, and we'll then lose about 500 FTE's worth of senior technical people with a ton of tribal knowledge, extensive social networks within the company, and years of delivering proven results. Yes, the numbers don't add up to 1000--managers at Intel tend to wear a ton of hats, put in a ton of unpaid overtime, and go the extra mile. Some don't, but I have firsthand knowledge that those folks aren't the only ones losing their jobs this month.

Re:Where are those anti-trust advocates now?

[Surt]

Here here, and as another point, there is almost no business with a higher cost of entry than CPU development.

Re:10% cut?

[Anonymous Coward]

You're not allowed to lay off your worst people, at least in California. That opens you up to lawsuits, where you'd have to prove *why* such-and-such a person wasn't adequately doing their job. All you're allowed to do is remove positions, and whoever happens to be in them. E.g., you can kill off a project, and let everyone on that project go.

This sometimes leads to pre-layoff rounds of musical chairs, where new projects are created, and good people reassigned onto them for safekeeping, before killing the old projects. You have to be careful to not be too obvious about it, though.

Re:netburst?

[postmortem]

NetBurst came from top - marketing decision to fool the customer into buying GHz number only, regardless of consumption and efficiency. No way that such "lucid" idea would come from designers; they were simply forced to implement it.

Re:Where are those anti-trust advocates now?

[JesseMcDonald]

Every business has a barrier to entry, and a new entrant always risks losing the resources they spent overcoming that barrier. If a monopolist is allowed to sell below cost to get rid of a competitor, it creates a chilling effect even if they later raise their prices. A new competitor must consider what happens if the monopolist does it again, and if the barrier to entry is already high (a fab, for example), the competitor will think twice and walk away instead.

You are wrong. Capital expenditures (a chip fab, for example) are not lost when a company fails. They merely pass into disuse for a time, and then change hands to a new upstart competitor. As long as the present methods (or sufficiently similar methods) of chip fabrication remain in demand such investments will retain their value. There are, of course, some costs which depreciate rapidly enough to be effectively lost should the company fail (recruiting, for example), but no sane company would invest resources in such areas until the solvancy of the company was guaranteed. To illustrate:

1. Company A invests $10M in durable chip fabrication capital (buildings, machinery, etc.).
2. Company B begins "dumping" its product to hold off competition, driving down prices.
3. Company A, realizing that the new low prices won't justify their investment, decides to cut its losses and enter a different market. This is where most analyses prematurely end. But what becomes of the capital investments? Are they a total loss? Of course not. They do not cease to exist with the desolution of the company. They still hold significant value.
4. Speculation Company(s) C buy(s) the capital in anticipation of future demand. Company A, or its constituent investors, use(s) the proceeds to enter a different market.
5. Some time passes. Prices approach their original levels. Demand for chip fabrication has increased, just as Companies A and C anticipated. (If their anticipation was incorrect, then they should lose resources as a result. Again, these resources are not destroyed, but rather are simply put to a better use.)
6. At these higher prices, Company D decides to enter the chip fabrication market, purchasing the fab capital from Speculation Company(s) C (with reduced time-to-market as a result of Company A's investment). They are now in almost the same position as Company A was previously, but the market for chip fabrication has improved in the interim, so they have a better chance. Also, Company B's resources have been reduced by their practice of selling below the opportunity cost.
7. Either Company D succeeds in achieving a sustainable market share, or we go back to step 3 and repeat the process until the market conditions are right for competition. Some companies come out a bit ahead, some lose somewhat, but the overall trend is toward a reduction in the barriers to entry (as the fab capital approaches completion).

Like the GP, I do not believe that there are any forms of apolitical "monopolies" that can stave off competition indefinitely. There are some market conditions which make local monopolies more efficient than competition could possibly be (so-called "natural monopolies"), but these are not situations in which intervention could possibly improve matters; they aren't staving off competition, because there isn't any. Such monopolies are an indication of resistance to arbitrary turnover in the market, which is a good thing -- it reduces uncertainty. They are still subject to competition, having been granted no special political protection, but should not and will not be replaced unless they truly fail to meet the needs of the market on a continuing basis.

Re:Where are those anti-trust advocates now?

[GlassHeart]

What you're missing is that the Company D would be a riskier investment given what happened to Company A. If it should fail, then Company E will be an even riskier investment. The perceived risk will increase and increase until Company B finally shows signs of real weakness, and successive challengers will have a harder and harder time getting funding. Do you actually have an example of an unregulated monopolist taken down through this successive challenger idea?

I also can't help but chuckle when I saw your $10M fab. Fabs easily cost billions of dollars.

Re:Where are those anti-trust advocates now?

[dada21]

Standard Oil was not a monopoly. Rockefeller reduced prices for consumers for years and years and years. Before the government even had a chance to take SO apart, competition did. Check the facts.

Better yet, read up here:

The Gates-Rockefeller Myth [mises.org]:
The efficiencies of economies of scale and vertical integration caused the price of refined petroleum to fall from over 30 cents per gallon in 1869 to 10 cents by 1874, and to 5.9 cents in 1897. During the same period Rockefeller reduced his average costs from 3 cents to 0.29 cents per gallon.

This is bad? How? Because competition was too inept and inefficient to give consumers better prices and more product? Come on, bring some facts to the Standard Oil "monopoly" myth.

We also see here:

Privileged Producers [mises.org]:

The U.S. Supreme Court declared in its 1911 decision breaking up the company: "Much has been said in favor of the objects of the Standard Oil Trust, and what it has accomplished. It may be true that it has improved the quality and cheapened the costs of petroleum and its products to the consumer."

Standard Oil was finally broken apart in 1911. Mary Ruwart [amazon.com] wrote a huge section of her book about the facts of the SO situation. In 1900, Standard Oil had a 90% share of the oil market based on being the most efficient and active producer. By 1911, Standard Oil had fallen to 65% because competitors found new oil wells in Texas and Oklahoma and were able to match Standard Oil's efficiencies in production and distribution. The anti-trust case hadn't even been settled by this point -- proof to me that the case wasn't needed.

Before the Standard Oil breakup, they were providing cheap oil to poor and sub-poor people who couldn't afford oil before SO was able to produce it so cheaply.

Every time I bring up examples of how monopolies just don't exist naturally (without government subsidies or preferential treatment), people bring up Standard Oil and only SO. They never bring up any other examples because there are none and the SO example is faulty -- they were not a monopoly, they were just efficient for a few decades.