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 mentioned there could be a discount in workers 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 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 modifications Tan introduced right now might end in appreciable job cuts that may 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 mentioned, “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 wish 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 gained’t be simple. We’re navigating an more and more unstable and unsure macroeconomic atmosphere, which is mirrored in our Q2 outlook. On high 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 isn’t a manner round the truth that these important modifications will cut back the scale of our workforce. As I mentioned after I joined, we have to make some very laborious choices to place our firm on a stable footing for the longer term. This may start in Q2 and we are going to transfer as shortly as potential over the following a number of months.”
In his letter, Tan mentioned 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 objective of $17.5 billion, and $16 billion in 2026,” he mentioned. “There isn’t a manner round the truth that these important modifications will cut back the scale of our workforce. As I mentioned after I joined, we have to make some very laborious choices to place our firm on a stable footing for the longer term. This may start in Q2 and we are going to transfer as shortly as potential over the following a number of months.”
Tan’s view of Intel’s tradition
Tan inherited a troublesome scenario 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 mentioned, 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 gradual, too complicated and too set in our methods — and we have to change,” he wrote.
He mentioned that the “flatter Govt Group (ET) construction that I shared final week was a primary step.” The following step is to drive higher simplicity, pace and collaboration throughout your entire firm, he mentioned. And so he has modifications coming. Amongst them: remaking the corporate’s AI technique, Tan mentioned in an analyst name. He additionally mentioned Intel’s monetary efficiency shouldn’t be the place it must be and that Intel would scale back its capital spending.
He additionally mentioned Intel wouldn’t spin off Intel Capital and put money into 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 modifications we can be driving are designed to make engineers extra productive by eradicating burdensome workflows and processes that decelerate the tempo of innovation,” Tan mentioned.
To make vital investments in engineering expertise and expertise roadmaps, Intel wants to search out new methods to cut back prices, he mentioned.
“Whereas we’ve got taken vital actions within the final yr, our present price construction continues to be effectively above aggressive benchmarks. With that in thoughts, we’ve got decreased our working expense and capital spending targets going ahead, which I’ll focus on throughout our investor name this afternoon,” he mentioned.
“As we refocus on engineering, we may also 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 have a look at their respective orgs, with a deal with eradicating layers, rising spans of management and empowering high performers. Our opponents are lean, quick and agile — and that’s what we should develop into to enhance our execution,” he mentioned.
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, a very powerful 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 probably the most performed with the fewest individuals. We’ll embrace this mindset throughout the corporate, which can embrace empowering our high expertise to make choices and take higher possession of key priorities.”
He mentioned the corporate would empower smaller groups to maneuver quicker and make higher choices and cut back the variety of layers in the best way. He mentioned Intel would steadiness reductions towards the necessity to retain and recruit key expertise. He mentioned he would maintain the group knowledgeable.
Streamlining processes
Tan mentioned 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 mentioned.
“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 also modernize processes with a deal with stay 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 optionally available is Intel’s traditions of formal Insights and OKR necessities. He thinks staying accountable and absorbing suggestions will be performed in a less complicated and extra versatile manner.
He mentioned 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 website. The four-day-in-office plan goes into impact on September 1, 2025.
He mentioned, “I understand this can be a lot to soak up, however we’re taking part in from behind and we have to rally as a group to place ourselves in the absolute best place to win.”
It’s fairly robust drugs, and never not like the robust 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 can be studied in enterprise faculties for generations to return. To create new applied sciences and deploy them at scale to vary the world for the higher.
“Intel was as soon as extensively 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 laborious. 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 longer term – and I’ve nice confidence within the energy of our group and our individuals to make it occur.”
In closing, he thanked workers “for every thing 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 mentioned his motto was to beneath promise and over ship, and he wouldn’t relaxation till Intel regained the belief of its prospects. Intel mentioned that tariffs would definitely have an effect on its enterprise, partly due to the warning it could generate amongst prospects.
