Partners: Intel Job Cuts Critical For Tapping Into Data Center, Internet Of Things Demand

Partners are applauding Intel’s announcement of massive layoffs as an indication that the Santa Clara, Calif.-based company is tightening its focus on the lucrative data center and Internet of Things markets and reducing dependence on the sluggish PC segment.

"As an Intel partner, Five Nines IT Solutions remains confident that the current leadership at Intel knows the direction they need to take and are executing on their business plan," said Douglas Grosfield, the founder and CEO of Five Nines IT Solutions, a Kitchener, Ontario-based Intel partner."Changes were necessary and I suggest this means a more effective Intel going forward. I also expect we will see them investing more in their other divisions, such as the IoT and data center lines of business, and perhaps the mobile space and gaming technologies, such as virtual reality and augmented reality tech.’

The company said Tuesday that it will cut 12,000 jobs globally -- about 11 percent of its workforce -- as part of an initiative to "intensify focus in high-growth areas where it is positioned for long term growth," according to a release.

[Related: Intel Earnings Preview: 5 Things Partners Want To Hear]

According to Intel, the jobs will be cut through mid-2017, and will save the company $750 million in in 2016. As of 2015, Intel employed about 107,300.

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Intel also said Tuesday that CFO Stacy Smith will move to a new role, leading sales, manufacturing and operations. Intel said it would begin a formal search for her successor.

The PC market continues to be an issue for Intel: The company during Tuesday’s earnings call lowered its PC market expectations, saying it expects the market to decline in the high single digits in 2016 -- faster than earlier expectations.

Meanwhile, Intel on Tuesday posted strong first-quarter results for its data center segment, which grew 9 percent over the same quarter last year, as well as its Internet of Things segment, which grew 22 percent over the same quarter last year.

"Our results over the last year demonstrate a strategy that is working and a solid foundation for growth," said CEO Brian Krzanich in an email to employees. "The opportunity now is to accelerate this momentum and build on our strengths. These actions drive long-term change to further establish Intel as the leader for the smart, connected world. ... I am confident that we'll emerge as a more productive company with broader reach and sharper execution."

Michael Goldstein, president and CEO of LAN Infotech, a Fort Lauderdale, Fla.-based Intel partner, said he views the layoffs and restructuring as a move by Intel to meet a "reshaping market" that puts cloud technologies -- which make up the data center and IoT markets -- in the forefront.

"You see the market reshaping. The world is changing," said Goldstein. "It doesn't worry me. I think these are the two hottest technologies that they are focusing on."

Goldstein, for his part, said that he sees a lot of demand for data center and Internet of Things technologies with his clients, saying both markets are "bigger than people think." As a partner, Goldstein said, he thinks it is good to see Intel position itself to capitalize on such high-growth markets.

Dominic Daninger, vice president of engineering at Nor-Tech, a Burnsville, Minn.-based custom system builder with a focus on high-performance computing [HPC], agreed.

"Intel is doing a lot with data center and specifically, HPC, and attacking these areas from many fronts," he said. "Intel's paying attention to what's going on with data center -- our HPC business is growing very well. I hope layoffs won't affect the HPC segments."

Intel has also seen a number of executive changes as the company deals with the challenges resulting from a weak PC market. A few weeks ago, Intel CEO Brian Krzanich said two top executives are departing the company: Kirk Skaugen, Intel's senior vice president for its Client Computing Group, and Doug Davis, general manager of Intel's Internet of Things Group.