Intel prepares major reorganisation

Intel's Paul Otellini warms up for cost cutting

Intel is preparing a cost-cutting reorganisation, the chipmaker's chief executive Paul Otellini revealed at a financial analyst conference.

The restructuring will cover all parts of the company in a bid to "adjust to the business realities of today [and] tomorrow".

Otellini did not say whether the reorganisation will lead to lay-offs, but did promise to "deal with non-performing business units" and to evaluate key metrics such as productivity and cost per unit.

Additional details about the pending restructuring were promised for the third quarter of this year.

Intel has seen its market share slide in recent years, and warned that 2006 revenues will drop by three per cent relative to last year. Profitability is likely to decrease by 6.5 percentage points to 24.7 per cent.

The chip giant cited lacklustre growth in PC shipments as well as a build-up of inventory over the past six months.

Intel has already committed to cutting spending by $1bn and to reduce capital expenditure, but Otellini admitted that this would be "insufficient".

To regain market share, the company will further emphasise its switch to a 65-nanometre production process. Intel expects that 65nm processors will become the dominant chips in the market by the third quarter.

The chipmaker also hopes to reignite the market by pushing its vPro business desktop platform unveiled earlier this week, as well as its Viiv entertainment platform and Centrino Duo mobile platform.