Lip-Bu Tan, the brand new CEO of Intel, despatched out a blunt message to staff saying the corporate has to reorganize to be extra environment friendly. He stated there could be a discount in staff, however he didn’t announce a precise variety of layoffs as anticipated.
Bloomberg reported that Intel is rumored to be getting ready to put off as many as 20% of its workers, which on the finish of 2024 was about 108,900 folks. A 20% reduce would quantity to roughly 21,780 jobs misplaced. And whereas the modifications Tan introduced at the moment may lead to appreciable job cuts that might begin within the second quarter, he didn’t spell out anticipated numbers.
Tan’s letter to employees 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 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 rapidly warned, “We have to construct on this progress — and it gained’t be straightforward. We’re navigating an more and more risky and unsure macroeconomic atmosphere, which is mirrored in our Q2 outlook. On high 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 a manner round the truth that these essential modifications will cut back the dimensions of our workforce. As I stated after I joined, we have to make some very exhausting choices to place our firm on a strong footing for the long run. It will start in Q2, and we are going to transfer as rapidly as doable over the subsequent a number of months.”
In his letter, Tan stated Intel had not set any headcount discount goal.
“What now we have 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 a manner round the truth that these essential modifications will cut back the dimensions of our workforce. As I stated after I joined, we have to make some very exhausting choices to place our firm on a strong footing for the long run. It will start in Q2 and we are going to transfer as rapidly as doable over the subsequent 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 Gadgets. 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 lots of of you has been constant. We’re seen as too gradual, too advanced and too set in our methods — and we have to change,” he wrote.
He stated that the “flatter Government Crew (ET) construction that I shared final week was a primary step.” The following step is to drive better simplicity, velocity and collaboration throughout all the firm, he stated. And so he has modifications coming. Amongst them: remaking the corporate’s AI technique, Tan stated in an analyst name. He additionally stated Intel’s monetary efficiency will not 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 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 lots of the modifications we might 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 now we have taken important actions within the final yr, our present value construction continues to be effectively above aggressive benchmarks. With that in thoughts, now we have 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 may even take away organizational complexity. Many groups are eight or extra layers deep, which creates pointless paperwork that slows us down. I’ve requested the ET to take a contemporary take a look at their respective orgs, with a give attention to eradicating layers, rising spans of management and empowering high 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 targeted on empowering engineers to do extra. He wrote, “I’ve been stunned to be taught that, in recent times, crucial 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 one of the best leaders get essentially the most achieved with the fewest folks. We are going to embrace this mindset throughout the corporate, which can embrace empowering our high expertise to make choices and take better possession of key priorities.”
He stated the corporate would empower smaller groups to maneuver sooner and make higher choices and cut back the variety of layers in the best way. He stated Intel would stability reductions towards the necessity to retain and recruit key expertise. He stated he would hold 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 remove pointless conferences and considerably cut back the variety of assembly attendees. An excessive amount of invaluable time is being wasted. We may even modernize processes with a give attention to reside dashboards and higher knowledge to make sure now we have the real-time insights we have to make higher and sooner choices,” 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 will be achieved in an easier and extra versatile manner.
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 understand it is a lot to soak up, 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 powerful medication, and never in contrast to 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 business icon. To tug off a comeback that might be studied in enterprise faculties for generations to return. To create new applied sciences and deploy them at scale to alter the world for the higher.
“Intel was as soon as broadly seen because the world’s most progressive firm. There’s no purpose we will’t get again there, as long as we drive the modifications wanted to enhance,” Tan wrote. “It’s going to be exhausting. It’ll 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 folks to make it occur.”
In closing, he thanked staff “for all the pieces 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 could generate amongst prospects.
