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 could 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 folks. A 20% minimize would quantity to roughly 21,780 jobs misplaced. And whereas the adjustments Tan introduced at present might lead to appreciable job cuts that might 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 precise course as we delivered income, gross margin and EPS (earnings per share) above our steering, 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 great execution.”
However he shortly warned, “We have to construct on this progress — and it received’t be simple. We’re navigating an more and more unstable and unsure macroeconomic atmosphere, which is mirrored in our Q2 outlook. On prime of that, there are numerous areas the place we should enhance. We have to confront our challenges head-on and take swift actions to get again on monitor.”
“There is no such thing as a means round the truth that these crucial adjustments will scale back the scale of our workforce. As I stated once I joined, we have to make some very laborious selections to place our firm on a stable footing for the long run. This can start in Q2 and we’ll transfer as shortly as potential 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 said purpose of $17.5 billion, and $16 billion in 2026,” he stated. “There is no such thing as a means round the truth that these crucial adjustments will scale back the scale of our workforce. As I stated once I joined, we have to make some very laborious selections to place our firm on a stable footing for the long run. This can start in Q2 and we’ll transfer as shortly as potential over the following a number of months.”
Tan’s view of Intel’s tradition
Tan inherited a tricky state of affairs as Intel has been dropping 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 a giant firm.
“As I’ve stated, this begins by revamping our tradition. The suggestions I’ve obtained from our prospects and lots of of you has been constant. We’re seen as too gradual, too complicated and too set in our methods — and we have to change,” he wrote.
He stated that the “flatter Govt Group (ET) construction that I shared final week was a primary step.” The subsequent step is to drive larger simplicity, pace and collaboration throughout all the 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 just isn’t 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 put money into exterior corporations. Intel is promoting 51% of its Altera programmable logic division to Silver Lake Companions. Altera has a price 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 most 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 needed investments in engineering expertise and know-how roadmaps, Intel wants to search out new methods to cut back prices, he stated.
“Whereas we’ve got taken important actions within the final 12 months, our present price construction continues to be effectively above aggressive benchmarks. With that in thoughts, we’ve got diminished our working expense and capital spending targets going ahead, which I’ll talk about throughout our investor name this afternoon,” he stated.
“As we refocus on engineering, we may also 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 contemporary have 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 change into to enhance our execution,” he stated.
As a longtime chip engineer, it’s no shock that Tan is targeted on empowering engineers to do extra. He wrote, “I’ve been stunned to be taught that, lately, crucial KPI for a lot of managers at Intel has been the scale of their groups. Going ahead, this won’t be the case. I’m a giant believer within the philosophy that the very best leaders get essentially the most accomplished with the fewest folks. We’ll embrace this mindset throughout the corporate, which can embrace empowering our prime expertise to make selections and take larger possession of key priorities.”
He stated the corporate would empower smaller groups to maneuver sooner and make higher selections and scale back the variety of layers in the way in which. He stated Intel would stability reductions in opposition to the necessity to retain and recruit key expertise. He stated he would maintain the crew knowledgeable.
Streamlining processes
Tan stated it has been eye-opening for him to see how a lot time and vitality is spent on inner 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 eradicate pointless conferences and considerably scale back the variety of assembly attendees. An excessive amount of useful time is being wasted. We may also modernize processes with a give attention to stay dashboards and higher knowledge to make sure we’ve got the real-time insights we have to make higher and sooner selections,” he wrote.
One of many issues he’s making non-compulsory is Intel’s traditions of formal Insights and OKR necessities. He thinks staying accountable and absorbing suggestions may be accomplished in a less complicated and extra versatile means.
He stated the corporate will return to work on the workplace 4 days per week, as a substitute of the present required three days per 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 enjoying from behind and we have to rally as a crew to place ourselves in the very best place to win.”
It’s fairly powerful medication, and never not like the powerful insurance policies that Intel’s former longtime CEO, Andy Grove, would do.
I’m speaking in regards to the alternative to basically reinvent an trade icon. To drag off a comeback that will likely be studied in enterprise faculties 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 revolutionary firm. There’s no motive we are able to’t get again there, as long as we drive the adjustments wanted to enhance,” Tan wrote. “It’s going to be laborious. It should require painful selections. However we’ll make them understanding 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 crew and our folks to make it occur.”
In closing, he thanked workers “for the whole lot 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 beneath promise and over ship, and he wouldn’t relaxation till Intel regained the belief of its prospects. Intel stated that tariffs will surely have an effect on its enterprise, partly due to the warning it could generate amongst prospects.
