Intel announces layoff of 1,000 managers, more may follow

Posted by Wolfgang Gruener and Scott M. Fulton, III

Santa Clara (CA) - An announcement did come from Intel today, but it wasn't the pleasant kind: The company is laying off about 1,000 managers, in a move spokesperson Chuck Malloy told TG Daily is intended "to improve communication flow and the decision-making process." Mulloy went on to say that only some of the managers selected for attrition have been notified, with the remainder expected to be told within the next few days.

First-line (low-level) and senior level managers will be affected by the layoffs, in all company categories, across all geographies, Mulloy told us. Executives would not be affected in this round of cuts, he said, mainly due to the fact that cutting at the executive ranks would require formal reporting to the SEC, and Intel is not quite prepared to make such reports. This left open the possibility that some executives could indeed be cut in the future, as part of the wide-ranging corporate reorganization announced by CEO Paul Otellini in late April. One month later, analysts speculated that Intel's layoff numbers could eventually reach as high as 16,000.

Are there just too many managers at Intel? we asked Chuck Malloy. No, he responded, just too many levels of managers. Upon re-examining Intel's corporate structure against that of its competitors, as well as of other competitive companies, "one of the first actions we've taken based on our analysis we announced in April," Malloy said, is to begin flattening the corporate organizational chart. During the past few years, he added, the number of managers has been growing at a rate faster than that of employees.

In response to the news, Intel shares traded somewhat lower before rebounding late in the day. Analysts may have triggered the selloff by commenting the layoff numbers were not high enough; many have anticipated an added zero at the end. Workers at Intel's Folsom campus outside Sacramento - whose numbers total about 7,000 - had been anticipating a wave of bad news today; many who work in that building's testing and research operations have been given at least a temporary reprieve.

A brief update on the status of the reorganization efforts, Malloy advised us, will come when the company makes its regular Q2 earnings report on Wednesday. Full details of the plan, however, may be delayed until at least the company's Q3 guidance call, if not later.