Intel reduces expenditure to cut costs

Intel is slashing its short-term discretionary expenditure until at least October following the slowdown in the US economy and poor PC sales in the fourth quarter of last year.

The chip giant hopes to make cost savings of hundreds of millions of dollars by reducing discretionary spending such as overtime, relocation and training expenses by 30 per cent.

It is also deferring pay increases for senior management from April until October, while other staff will have half of their pay increases deferred until the same date. The situation will be reassessed at this time pending an improvement in economic conditions.

An Intel spokeswoman said that, although there were no plans to make layoffs, the vendor would restrict the hiring of new personnel to essential posts such as engineering and technical staff, and that overall employee numbers would be reduced through attrition. Intel currently has 80,000 staff worldwide.

"Economic conditions are quite uncertain and we're trying to ensure we can invest in capital expenditure and research and development (R&D). To get out of this period of slowdown, we need to invest in new technology," she explained.

"This has combined with a situation where we have seen PC sales slow dramatically in the fourth quarter, and in the first quarter we have seen higher than usual levels of PC inventory in the channel," she added.

The spokeswoman emphasised, however, that the company was boosting its capital expenditure this year to $7.5bn from $6.7bn last year, and was upping its R&D spend to $4.3bn from $3.9bn in 2000. But she was unable to say whether this increase would offset the cuts elsewhere.