Cost-Cutting Measures in Response to Weaker Market. Intel, a leading chipmaker, unveiled disappointing financial results for the second quarter of 2024, Intel Stumbles falling short of analyst expectations on both revenue and earnings per share. The company also announced a series of drastic measures to address these challenges, including significant job cuts, a suspended dividend, and reduced capital expenditures.
Revenue for the quarter reached $12.83 billion, down slightly from the same period last year. However, this figure fell short of analyst forecasts of $12.94 billion. Earnings per share were also underwhelming, with Intel reporting an adjusted profit of 2 cents compared to the anticipated 10 cents per share.
Intel Stumbles Aggressive Investments and Competitive Pressures Cited
Intel CEO Pat Gelsinger attributed the lower-than-expected results to two key factors. Firstly, the company made a strategic decision to accelerate production of its Core Ultra PC chips, designed for artificial intelligence (AI) workloads. While this investment positions Intel well for the future of AI-powered computing, it put pressure on margins in the short term. Secondly, Intel faced a more competitive market environment with companies like AMD and Qualcomm vying for market share.
In response to these challenges, Intel outlined a comprehensive cost-cutting plan. The centerpiece of this initiative is a workforce reduction of approximately 15,000 employees, constituting the largest single layoff in the company’s history. Furthermore, Intel is suspending its dividend for the fourth quarter of fiscal 2024 and significantly reducing planned capital expenditures. These measures are expected to generate approximately $20 billion in cost savings this year, with further reductions projected for 2025 and beyond.
Despite the cost-cutting efforts, Intel’s outlook for the current quarter remains cautious. The company anticipates an adjusted net loss of 3 cents per share on revenue ranging from $12.5 billion to $13.5 billion. boutlook falls short of analysts’ projections who predicted adjusted earnings of 31 cents per share on revenue of $14.35 billion.
Looking Ahead: Focus on Domestic Manufacturing and AI
While acknowledging near-term headwinds, Intel remains optimistic about its long-term prospects. The company points to its reliance on Taiwan’s TSMC for AI-compatible Lunar Lake chips as a temporary measure. Moving forward, Intel plans to leverage its own manufacturing capabilities for the next-generation Panther Lake processors, aiming to achieve a more cost-effective production model because of Intel Stumbles. Additionally, Intel remains committed to its investments in AI technology, confident that the AI PC market will experience significant growth in the coming years.
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