Lip-Bu Tan, the brand new CEO of Intel, despatched out a blunt message to workers saying the corporate has to reorganize to be extra environment friendly. He stated there can be a discount in workers however he didn’t announce an actual variety of layoffs as anticipated.
Bloomberg reported that Intel is rumored to be making ready to put off as many as 20% of its staff, which on the finish of 2024 was about 108,900 individuals. A 20% lower would quantity to roughly 21,780 jobs misplaced. And whereas the adjustments Tan introduced at this time may lead to appreciable job cuts that will begin within the second quarter, he didn’t spell out anticipated numbers.
Tan’s letter to workers coincided with the discharge of Q1 2025 quarterly numbers. For the earnings, Tan stated, “It was a step in the proper path as we delivered income, gross margin and EPS (earnings per share) above our steerage, pushed by [former interim co-CEOs Dave Zinsner and Michelle Johnston’s] management. I need to thank them each, and all of you, for the nice execution.”
However he shortly warned, “We have to construct on this progress — and it received’t be straightforward. We’re navigating an more and more unstable and unsure macroeconomic setting, which is mirrored in our Q2 outlook. On prime of that, there are a lot of areas the place we should enhance. We have to confront our challenges head-on and take swift actions to get again on monitor.”
“There isn’t any method round the truth that these vital adjustments will scale back the dimensions of our workforce. As I stated once I joined, we have to make some very onerous choices to place our firm on a stable footing for the long run. This can start in Q2 and we are going to transfer as shortly as doable over the following a number of months.”
In his letter, Tan stated Intel had not set any headcount discount goal.
“What we’ve got set is a brand new non-GAAP working expense goal to roughly $17 billion in 2025, down from our beforehand acknowledged purpose of $17.5 billion, and $16 billion in 2026,” he stated. “There isn’t any method round the truth that these vital adjustments will scale back the dimensions of our workforce. As I stated once I joined, we have to make some very onerous choices to place our firm on a stable footing for the long run. This can start in Q2 and we are going to transfer as shortly as doable over the following a number of months.”
Tan’s view of Intel’s tradition
Tan inherited a troublesome scenario as Intel has been shedding within the AI/graphics market to Nvidia and within the x86 processor market to Superior Micro Units. He didn’t mince phrases about criticizing Intel’s tradition as an enormous firm.
“As I’ve stated, this begins by revamping our tradition. The suggestions I’ve acquired from our prospects and plenty of of you has been constant. We’re seen as too sluggish, too complicated and too set in our methods — and we have to change,” he wrote.
He stated that the “flatter Government Workforce (ET) construction that I shared final week was a primary step.” The subsequent step is to drive better simplicity, velocity and collaboration throughout your complete firm, he stated. And so he has adjustments coming. Amongst them: remaking the corporate’s AI technique, Tan stated in an analyst name. He additionally stated Intel’s monetary efficiency shouldn’t be the place it must be and that Intel would scale back its capital spending.
He additionally stated Intel wouldn’t spin off Intel Capital and spend money on exterior firms. Intel is promoting 51% of its Altera programmable logic division to Silver Lake Companions. Altera has a worth of $9 billion, and in order that deal will generate appreciable money for Intel.
“We have to get again to our roots and empower our engineers. That’s why I elevated our core engineering features to the ET. And lots of the adjustments we will likely be driving are designed to make engineers extra productive by eradicating burdensome workflows and processes that decelerate the tempo of innovation,” Tan stated.
To make mandatory investments in engineering expertise and expertise roadmaps, Intel wants to search out new methods to scale back prices, he stated.
“Whereas we’ve got taken vital actions within the final yr, our present price construction remains to be properly above aggressive benchmarks. With that in thoughts, we’ve got lowered our working expense and capital spending targets going ahead, which I’ll focus on throughout our investor name this afternoon,” he stated.
“As we refocus on engineering, we can even take away organizational complexity. Many groups are eight or extra layers deep, which creates pointless forms that slows us down. I’ve requested the ET to take a recent take a look at their respective orgs, with a give attention to eradicating layers, rising spans of management and empowering prime performers. Our rivals are lean, quick and agile — and that’s what we should develop into to enhance our execution,” he stated.
As a longtime chip engineer, it’s no shock that Tan is concentrated on empowering engineers to do extra. He wrote, “I’ve been stunned to study that, in recent times, a very powerful KPI for a lot of managers at Intel has been the dimensions of their groups. Going ahead, this won’t be the case. I’m an enormous believer within the philosophy that the perfect leaders get essentially the most carried out with the fewest individuals. We are going to embrace this mindset throughout the corporate, which can embrace empowering our prime expertise to make choices and take better possession of key priorities.”
He stated the corporate would empower smaller groups to maneuver quicker and make higher choices and scale back the variety of layers in the way in which. He stated Intel would steadiness reductions towards the necessity to retain and recruit key expertise. He stated he would maintain the staff knowledgeable.
Streamlining processes
Tan stated it has been eye-opening for him to see how a lot time and power is spent on inside administrative work that doesn’t transfer the enterprise ahead.
“We have to radically simplify this to maximise the time spent specializing in our prospects,” he stated.
“I’m instructing our leaders to get rid of pointless conferences and considerably scale back the variety of assembly attendees. An excessive amount of beneficial time is being wasted. We can even modernize processes with a give attention to reside dashboards and higher information to make sure we’ve got the real-time insights we have to make higher and quicker choices,” he wrote.
One of many issues he’s making elective is Intel’s traditions of formal Insights and OKR necessities. He thinks staying accountable and absorbing suggestions could be carried out in an easier and extra versatile method.
He stated the corporate will return to work on the workplace 4 days every week, as a substitute of the present required three days every week on web site. The four-day-in-office plan goes into impact on September 1, 2025.
He stated, “I notice it is a lot to absorb, however we’re taking part in from behind and we have to rally as a staff to place ourselves in the very best place to win.”
It’s fairly robust medication, and never in contrast to the robust insurance policies that Intel’s former longtime CEO, Andy Grove, would do.
I’m speaking concerning the alternative to basically reinvent an business icon. To tug off a comeback that will likely be studied in enterprise colleges for generations to come back. To create new applied sciences and deploy them at scale to vary the world for the higher.
“Intel was as soon as broadly seen because the world’s most modern firm. There’s no purpose we will’t get again there, as long as we drive the adjustments wanted to enhance,” Tan wrote. “It’s going to be onerous. It can require painful choices. However we are going to make them figuring out it’s what we should do to serve our prospects higher as we construct a brand new Intel for the long run – and I’ve nice confidence within the energy of our staff and our individuals to make it occur.”
In closing, he thanked workers “for all the things you probably did in Q1.” In an analyst name, he famous he joined 5 weeks in the past. He changed the interim bosses in addition to former CEO Pat Gelsinger, who resigned in December 2024.
Tan stated his motto was to below promise and over ship, and he wouldn’t relaxation till Intel regained the belief of its prospects. Intel stated that tariffs would definitely have an effect on its enterprise, partly due to the warning it might generate amongst prospects.
