Intel, the renowned US chip-maker, has unveiled plans to cut over 15,000 jobs in a bid to rejuvenate its struggling business and catch up with competitors. The announcement came as a shock, leading to a significant plunge in the company's shares by up to 20%. This news also sent ripples through the tech industry, contributing to a sharp decline in Asian stock markets.
Intel's CEO, Pat Gelsinger, acknowledged the firm's challenges in a memo to staff. Our revenues have not grown as expected, and we’ve yet to fully benefit from powerful trends, like AI, he wrote, emphasizing the need for bolder actions and a fundamental change in operations. The company reported a 1% year-on-year decline in sales for the three months ending in June and warned of a worse-than-expected second half of the year.
As part of its restructuring efforts, Intel has slashed investment plans and suspended dividend payments. Lucy Coutts, investment director at JM Finn, commented on the situation, saying, It's really having to pull back on spending on its data centres and it’s struggling to take market from other providers, so it’s a real shock to the market.
Intel has been grappling with increased competition from rivals like Nvidia, known for its powerful AI chips. This struggle has led businesses to turn away from Intel, further impacting its sales and market position. The company's efforts to catch up with these competitors are evident in its recent drastic measures.
In contrast, there was some positive news from Apple, which reported a rebound in sales during the spring, overcoming weaknesses in China and a dip in iPhone sales. Apple's revenues for the three months to June were $85.8bn, up 5% year-on-year, marking a return to growth after a slump at the start of 2024. Apple CEO Tim Cook expressed optimism about the company's future, particularly in relation to AI. We remain incredibly optimistic about the possibilities of AI and we will continue to make significant investments in this technology, Cook said.
Apple's recent AI-powered improvements to its software have convinced customers to upgrade their devices, contributing to increased sales of Macs and iPads. The company also reported an all-time record in revenue from its services division, which includes offerings like Apple Pay and Apple News.
Intel's drastic job cuts and operational changes underscore the challenges it faces in a rapidly evolving tech landscape. As the company seeks to regain its footing and capitalize on emerging trends like AI, it must navigate a competitive market and address its internal challenges to achieve sustained growth.
