Intel to Reduce Workforce by 4,000

The world's largest semiconductor company said the 4.8 percent reduction in its workforce is necessitated by continuing softness in demand for the chips that power personal computers.

"We haven't seen an economic recovery in our business yet," said Andy Bryant, Intel's chief financial officer. "We want to be cautious in our spending."

As was the case a year ago, most of the cuts will be made through attrition, Bryant said in an interview.

Intel had 83,000 employees worldwide at the end of the first quarter, down from 86,000 at the end of 2000. Last year, the company said it was cutting 5,000 jobs, also mostly through attrition.

The greatest job loss took place early last year, when Intel closed a factory in Puerto Rico and 1,300 people lost their jobs. Others were redeployed throughout the company.

Unlike other high-tech firms over the past year, Intel escaped massive layoffs. Instead, the company slashed discretionary spending such as travel and delayed raises.

Executives said past downturns had shown that companies could not cut and save their way through a recession and be prepared for an upturn at the other end.

But in October, chief executive Craig Barrett told employees that the company's headcount was 20,000 higher than it was in 1999 even though revenues remained roughly the same.

For the three months ended June 29, the company said it earned $446 million, or 7 cents a share, compared with profits of $196 million, or 3 cents a share, in the same period last year.

Excluding acquisition-related costs, the company earned $620 million, or 9 cents a share, compared with earnings of $854 million, or 12 cents a share, last year.

Sales were $6.32 billion, slightly lower than the $6.33 billion reported a year ago.

Analysts were expecting second-quarter profits of 11 cents per share on sales of $6.35 billion, according to a survey by Thomson Financial/First Call. Intel said analyst estimates do not include a $106 million charge announced last month to close Intel Online Services, its Web hosting service.

Earlier this month, Intel warned that it would not meet previous its previous sales forecast of $6.4 billion to $7 billion, lowering the range to between $6.2 billion and $6.5 billion.

At the time, it blamed lower-than-expected sales on soft demand for PC processors in Europe.

Executives also suggested the hoped-for back-to-school increase in PC sales was not materializing as expected. Computer vendors purchase parts well in advance of peak consumer purchasing.

The research firm NPD Intellect reported an 11 percent month-to-month decline in U.S. PC sales in June, compared with a typical seasonal increase of 25 percent for the period. May sales, however, were a bit stronger than usual.

Rival Advanced Micro Devices Inc. issued two warnings last month that its second-quarter sales would not meet expectations. AMD is expected to release its earnings after the markets close Wednesday.

Shares of Intel closed down 76 cents, or nearly 4 percent, to $18.36 in Tuesday trading on the Nasdaq Stock Market.

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