Components & Peripherals News
Intel To Cut Executive, Senior Employee Pay To Preserve Cash
Intel CEO Pat Gelsinger and other executives are getting pay cuts in the double digits while senior employees will see their salaries slashed by 5 percent, according to a memo seen by CRN. ‘These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy,’ a spokesperson says.
Intel plans to cut the base pay of executives and senior employees as part of the chipmaker’s multibillion-dollar spending reduction plan.
The semiconductor giant announced the plan, which also included the suspension of quarterly profit bonuses and employee recognition programs, in a meeting with employees Tuesday, according to a memo seen by CRN that summarized the gathering’s main talking points.
“We’re in one of the toughest macro-environments we’ve ever seen,” Intel CEO Pat Gelsinger was quoted as saying at the meeting. “Today my job and that of the leadership team is to lead us through this tough time and reposition ourselves for growth,” Gelsinger added.
An Intel spokesperson confirmed the pay cut plan to CRN.
“As we continue to navigate macro-economic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programs,” the spokesperson said in a statement.
“These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy,” the Intel representative added. “We are grateful to our employees for their commitment to Intel and patience during this time as we know these changes are not easy.”
Which Intel Employees Are Getting Pay Cuts
Effective March 1, the pay cuts will go all the way to the top, with Gelsinger’s salary taking a 25 percent reduction. Gelsinger’s base compensation last year was $1.25 million.
Other members of Intel’s executive leadership team will take a 15 percent salary reduction. Executives below that level will receive a 10 percent pay cut.
As for Intel’s wider base of employees, staff at the upper echelons of the company’s pay schedule will receive a 5 percent salary reduction. Those impacted are at pay grade levels 7-11 and mostly consist of senior and director-level staff, according to an Intel diversity report.
Hourly employees will not be impacted by the pay cuts.
“Reductions are on a graduated scale designed to affect executive compensation more significantly, with Grade 6 and below and non-exempt employees receiving no reduction,” the memo said.
Intel also plans to suspend merit-based pay raises for 2023, quarterly profit bonus programs and employee recognition programs. In addition, the company will cut in half its 401k match program for U.S. employees from 5 percent to 2.5 percent.
The move didn’t concern solution provider executive Randy Copeland, CEO of Velocity Micro, a Richmond, Va.-based Intel PC system builder partner. He said Intel has “always been a very high-paying company to work for” and when the times are good, the company has shared the wealth with staff, so it makes sense for Intel to pull back on spending during tough times.
“When things get tighter, you’ve got to tighten the belt. You can’t spend more than you’re bringing in. And they’ve got to get back to the right return on investment, which, over the next three to five years, I think is exactly what they’ll do,” Copeland told CRN.
Pay Cuts Part Of Massive Spending Reduction Plan
The salary reductions and other changes are part of a massive cost-cutting program announced last October that will reduce Intel’s spending by $3 billion this year and up to $10 billion both for 2024 and 2025. This would amount to $23 billion in cuts over the next three years.
Intel is enacting the spending cuts in reaction to a significant downswing in demand for chips, which is being exacerbated by increased competition from AMD and other rivals. These factors contributed to Intel’s annual revenue dropping by 20 percent in 2022 while its gross margin dipped below 50 percent, which were below the initial financial targets given by the company last year.
“We are even more aggressively executing on the cost measures we described in Q3, even as we keep the investments critical to our long-term transformation intact, with a clear eye on making the right capital allocation decisions to drive the most long-term value,” Gelsinger said last week.
While Gelsinger has said that Intel remains on track to restore the company’s chip manufacturing leadership in 2025 as part of his ambitious comeback plan, the chipmaker expects financial conditions to deteriorate in the first half of this year after its fourth-quarter 2022 results were worse than what the company and shareholders expected.
The company has already cut costs in several ways. These measures have included reducing its head count through layoffs or voluntary buyouts. The company has also begun to whittle down its product portfolio in noncore areas by ending future investments for its Tofino network switch chip business, which originated from Intel’s 2019 acquisition of Barefoot Networks.
Intel has made cuts elsewhere, canceling a $200 million development center in Israel, a $700 million data center cooling lab in Oregon and its Pathfinder RISC-V development program.
The news of pay cuts has been reported elsewhere, including Bloomberg.