Intel layoffs raise questions about Canadian operations

It isn’t clear what impact Intel Corp.‘s attempt to save US$2billion next year by cutting 10,500 people will have on its Canadian operations.

In an interview with ITBusiness.ca Intel Canada manager Doug Cooper said that he “doesn’t know” if he or any of his staff of 30 will be affected by Wednesday’s announcement.

“There’s no other data other than what you saw” in Tuesday’s press release from corporate headquarters, he said.

He also said he wasn’t expecting to discuss possible staff cuts today with company executives.

“I think it will spread out over the next couple of weeks, if not longer,” he said.

Cooper’s division oversees marketing and channel strategies with major PC desktop and server OEMs, retailers, and system builders in this country, as well as responsibility for persuading Canadian IT manufacturers to put Intel chips in their equipment.

Although still very profitable, Intel is undertaking a massive restructuring in the face of intense competition from AMD. In particular AMD’s Opteron chips have allowed it to take about a quarter of server market, once overwhelmingly in Intel’s palm. The competition has also pushed the price down on processors, which reduces margins.

In making its announcement yesterday, Intel said it is looking a cutting its workforce worldwide to 95,000 by the end of this year through job cuts and attrition. That total will drop to 92,000 by the middle of next year.

That means roughly over a 12-month period it will shed 10,500 jobs. Most will come in management, marketing and information technology functions, although they will also include people caught in the sale of Intel businesses as well as attrition.

“It takes a while to propagate all the right actions in a 90-some-odd organization,” Cooper said in attempting to explain why he may not know now what his unit will face.

Financially-troubled IT companies have in the past pulled back some or all of their Canadian operations into the U.S. However, microprocessor analyst Nathan Brookwood, who heads Insight 64, a Saratoga, Calif.-based consultancy, doubts lntel will go that far.

“My understanding is a lot of people at Intel Canada interface with government agencies and leading IT influencers and large customers who need a lot of attention,” he said, “and I don’t know if you consolidate that group into the U.S it would have the same ability to work closely, especially with government customers.”

Although some in the industry have wondered whether Intel should have followed the lead of Hewlett-Packard and slashed jobs immediately, Brookwood said that wouldn’t have been wise.

HP “really incurred the enmity of their employees when they did that,” he said. “You need to do these things in a way that is not terribly disruptive.”

He added that Intel has better sense than HP of which employees are most valuable and will make its cuts more intelligently.

Brookwood does, however, have skepticism about the effectiveness of where Intel – in admittedly bland statements – says it will trim.

“They’re not indicating any plan to cut back on any of the deliverables – product programs, marketing programs, development programs – that the company has in place,” he said. “That seems to me to be a little bit unrealistic, because basically they’re saying ‘Hey we can work smarter and get the same job done with 10 per cent fewer people.’ And if that was an organization where there were a lot of people who weren’t doing a lot of important work before, I would agree that might be doable.

“(But) Intel is the type of company that does not have a lot of people standing around the water cooler talking about last night’s football game or upcoming elections. These people go to work and work very hard. They’re already giving 110 per cent. Now Intel is going to be looking for them to give 120 per cent.”

In particular Brookwood is critical that Intel isn’t talking about eliminating its history of “spending a lot money on R & D doing things two or three times that probably only need to be done once.” For example it has allowed several teams to design a processor, each working on exploiting a different technology but aimed at the same market. It’s a strategy to backup against failure, but one Intel can’t afford any more, he suggested.

Cooper wouldn’t say if he’s concerned about the possible effect on his staff’s morale by spreading out the news over a number of days or weeks. “I think that’s a concern for all managers,” he said. “These things are not very easy and they present challenges to all leaders within companies. These are the right things to do and we’ll see how it develops over the coming days.”

Next year Intel expects the job reductions will be more broadly based through efficiencies gained in improved manufacturing processes and the elimination of “organizational redundancies.”

By 2008 it hopes the restructuring will save US$3 billion a year.

Cooper noted that three months ago Intel announced an efficiency task force was going to make recommendations on saving the company money.

“The employees were well aware of the scale and scope of the activity. Everybody knows it’s a tough thing to do. It’s not a small number of people over that period of time. We also know it’s the right thing to do . . . but the details of how that’s going to happen still have to be determined, or at least communicated to those that are affected.”

Asked if he’s satisfied the steps will help Intel in Canada solidify its position against AMD, he said that “these changes are good for Intel, and by that definition what’s good for Intel will be good for Intel in Canada.”

As part of its battle with AMD, Intel introduced more than 20 new processors this summer and has promised to bring the year to a climax by releasing a quad-core CPU. AMD has fought back with processor announcements of its own.

Comment: info@itbusiness.ca

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