Confirming earlier rumors of impending layoffs, Intel on Tuesday announced plans to eliminate up to 12,000 positions globally, which works out to around 11 percent of its total workforce.
Intel's official reasoning for the layoffs is that it's in the midst of a restructuring effort. If taken at face value, Intel is looking to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices, otherwise known as the Internet of Things (IoT).
"Our results demonstrate a strategy that’s working and a solid foundation for growth. Our opportunity now is to accelerate our momentum and build on our strengths. But this requires some difficult decisions. With that context, today we are announcing a restructuring initiative that will allow Intel to intensify our investments in the products and technologies that fuel our growth, and drive more profitable mobile and PC businesses," Intel CEO Brian Krzanich stated in an open letter to employees (PDF) (opens in new tab).
Intel is coming off a quarter in which it raked in $13.8 billion in revenue (PDF) (opens in new tab) en route to a profit of $2.6 billion on a non-GAAP basis. There's probably not many companies that would look at those kinds of numbers and conclude that a major reduction in its workforce is in order.
The real reason for the 12,000 layoffs might not be found in Intel's official rhetoric. According to Re/Code (opens in new tab), workforce reduction is the result of Intel missing the mobile revolution. It's hard to argue against that notion when you look around and see so many smartphone and tablet devices running on ARM hardware.
Intel's also adjusting to ongoing PC shipment declines. While gaming PC sales are doing fine, PC shipments as a whole just fell for the sixth consecutive quarter to 64.8 million units in Q1 of this year. That's the first time since 2007 that PC shipments dipped below 65 million units. The upside is, the PC gaming space continues to see record growth.
None of this is to say that Intel will stop making processors. Even though revenue from Intel's Client Computing Group dropped 14 percent sequentially and two percent year-over-year to $7.5 billion, it was still the company's biggest earner, and by a wide margin. The only other segment to pull in billions of dollars last quarter was Intel's Data Center Group, which added $4 billion to the pile.
Intel's making itself leaner as it looks to increase investments in its cloud and IoT efforts. At the same time, Intel said it will look to grow specific client segments, including 2-in-1s, gaming, and home gateways. In other words, you can still count on Intel to deliver faster processors to keep your gaming rig up to date.
The takeaway from this? More people need to play games and Intel needs to double down on gaming.