The latest victim of a slowing US economy, Intel warned that its first quarter sales would fall as much as 25 per cent and said it would cut 5,000 jobs, or about six per cent of its workforce.
The chipmaker said it now expects revenue to be around $6.5bn down, about 25 per cent below fourth quarter revenue of $8.7bn. The company had previously indicated that first-quarter revenues would be down 15 per cent from the prior quarter.
Intel also said it expects its gross margin to be 51 per cent compared with its previous forecast of 58 per cent. R&D spending should also be down slightly, from $4.3bn to $4.2bn.
Intel, which has about 86,000 employees, expects to reduce its headcount over the next nine months mainly through attrition. It did not specify what areas of the company would be affected, but did say the reduction would exclude any additions from future acquisitions.
Intel blamed the bad news on the economic slowdown which continues to affect demand for personal computers and has spread to other sectors, including networking, communications and servers.
The company's stock, which had been climbing, along with other chip stocks, over the last several days, fell seven per cent to $30.94 in after-hours trading after rising to $33.25 in regular trading on the Nasdaq Stock Market.
Last week, Intel chief executive Craig Barrett told developers that the company plans to invest heavily in research and development this year. "You never save your way out of a recession," he told the Intel Developer Forum in San Jose.
The last time Intel faced reductions was in 1998 when the chipmaker cut 3,000 positions from a total of 65,000.
Intel is due to report its first-quarter financial results on April 17.
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