By Intel will sever 15% of its workforce and stop paying Intel dividends.
Intel dividends updates
On Thursday, Reuters Intel (INTC.O) announced that it will cut over 17,000 jobs, which is more than 15% of its workforce. The company also stated that it will stop paying out dividends beginning in the fourth quarter in order to turn around its manufacturing division, which is currently losing money. Intel is focusing on AI chips, where it lags behind competitors, and reducing spending on traditional data center semiconductors. The company also predicted third-quarter revenue below market estimates.
In extended trading, Intel’s shares fell 20%, causing the chipmaker to lose more than $24 billion in market value. Intel, based in Santa Clara, California, experienced a 7% decline in the stock on Thursday, coinciding with a broader decline in American chip stocks following Arm Holdings’ cautious forecast on Wednesday.
The chip industry was not surprised by the results. Nvidia (NVDA.O), a major player in Artificial Intelligence (AI), and its smaller rival AMD (AMD.O) both saw their values increase after hours, showcasing their positioning to benefit from the AI boom, in contrast to Intel’s relative disadvantage.
In an effort to turn things around, Intel will sever 15% of its workforce and stop paying Intel dividends.
In an interview with Reuters, CEO Pat Gelsinger stated that he needs fewer people at headquarters and more people in the field supporting customers. He also mentioned that their objective is to pay a competitive dividend over time, but for now, they are focusing on the balance sheet and deleveraging in reference to the dividend suspension.
Intel employed 116,500 people as of June 29, with most job cuts expected to be completed by the end of 2024, excluding certain subsidiaries. The company announced a quarterly dividend of 12.5 cents per share in April.
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Intel is currently implementing a turnaround plan focused on creating cutting-edge AI processors and expanding its manufacturing capabilities for hire in an attempt to regain the technological advantage it lost to Taiwan’s TSMC (2330.TW), the largest contract chipmaker in the world. Under Gelsinger, there was a drive to revitalize the declining foundry business, which increased Intel’s expenses and pressured profit margins. The chipmaker has recently declared it will reduce expenses.
Intel’s shares have dropped more than 40% so far this year due to the company’s late entry into the AI chip market.
According to LSEG data, Intel projects revenue for the third quarter of $12.5 billion to $13.5 billion, below the average estimate of $14.35 billion made by analysts. It predicted an adjusted gross margin of 38%, which was significantly less than the 45.7% market estimate.
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