Technology giant Intel (NASDAQ:INTC) initiated a new round of job cuts this week, impacting an undisclosed number of employees in its sales and marketing unit. The Intel layoffs have occurred during the same week that management announced a new financial reporting structure. While the innovation space has flourished, INTC stock has struggled this year following a poor outlook for its core business.
According to a CRN report, an Intel spokesperson confirmed that it made job cuts as part of a reorganization. Beyond that, the company did not provide any further details. “With the objective of continuing to deliver on company strategy and drive outcomes for its customers, Intel’s [Sales and Marketing Group] announced changes to its organizational structure,” stated the representative.
Notably, this latest round of Intel layoffs is the first since CEO Pat Gelsinger announced in October 2022 that the company planned to cut spending by as much as $10 billion through 2025. The directive centered on weathering an “abrupt and pronounced slowdown in demand.”
Challenging Semiconductor Environment Exacerbated Intel Layoffs
Moreover, the Intel layoffs were announced as management outlined a new financial reporting structure. This initiative separates the company’s product design businesses from its chip manufacturing operations. Worryingly, the former category incurred an operating loss of $7 billion last year.
CRN reports that Intel is separating the businesses in an effort to turn its chip-manufacturing arm into an independent contract chip-manufacturing business. Subsequently, management aims to compete directly with foundry stalwarts Taiwan Semiconductor (NYSE:TSM) and Samsung.
During the announcement of the new reporting structure, management stated that the foundry unit’s “operating losses are expected to peak in 2024.” Further, the business is expected to “achieve break-even operating margins midway between now and the end of 2030, when it targets 40 percent non-GAAP gross margins and 30 percent non-GAAP operating margins.”
That should be good news for INTC stock. Still, the tech giant faces significant challenges. As InvestorPlace contributor Joel Baglole mentioned, Intel has struggled this year, putting the blame on a poor outlook for its core business of supplying microchips for personal computers and servers.
Despite a blistering performance in tech stocks, the Intel layoffs serves as a reminder of the sector’s broader efforts to cut costs. Last year, nearly 1,200 tech firms laid off 263,180 people.
Why It Matters
Currently, Wall Street analysts rate INTC stock as a consensus hold. This assessment breaks down as seven buys, 24 holds and four sells. Overall, the average price target comes in at $46.60, implying more than 16% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
