Intel slashes staff salaries, bonuses amid disappointing financial performance
The money-saving drive comes as the hardware sector has been hit especially hard by the economic headwinds facing all tech companies
Intel has announced a wave of pay cuts and reduced benefits in the wake of poor quarterly earnings, affecting mid-level, vice presidential, and executive staff.
The firm is reportedly set to cut mid-level staff wages by 5% in March, with higher-level roles such as VPs and executives facing 10% and 15% salary cuts respectively. Pat Gelsinger, CEO at Intel, could also cut his salary by up to 25%.
Staff will also face greatly-reduced benefits in the immediate future, with quarterly bonuses and merit-based raises cancelled and the company’s 401(k) matched payment scheme reduced from 5% to 2.5%.
“This was an incredibly dumb move, as employees will become “quiet quitters” and lose morale,” wrote semiconductor analyst Dylan Patel, who stated that all Intel employees in grades 7 to 11 will see cuts.
“Bonus cuts are one thing, but base pay cuts sting. Intel, unfortunately, has to cut costs dramatically due to its immense amount of cash being burned, but they are doing it in the worst way.”
“High performers likely start to 'phone it in' while they look for their next job, as there is no incentive to keep working long nights and early mornings. The level 7 cut-off point is too low. This includes some fresh advanced graduates and many normal graduates with a handful of years of experience.”
The changes have been implemented following a challenging quarter - the chip giant announced its Q4 revenue of $14 billion on 26 January, down 32% year-on-year, with its client computing group business unit reporting a 36% year-on-year decline.
The decline follows the ‘biggest ever decline’ in worldwide PC shipments, which has impacted hardware.
“Despite the economic and market headwinds, we continued to make good progress on our strategic transformation in Q4, including advancing our product roadmap and improving our operational structure and processes to drive efficiencies while delivering at the low end of our guided range,” said Gelsinger on the earnings call.
Other firms have been affected by the downturn in hardware sales, with Microsoft having reported a 39% drop in device revenue across the same period.
Reuters reported that Gelsinger had described Intel as having “stumbled” in its recent performance.
The firm has ceded market share to main rival Advanced Micro Devices (AMD) which reported better-than-expected earnings in its Q4 call.
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Shareholders are not expected to receive reduced payouts, and annual bonuses will continue to be paid. However, as annual bonuses are linked to the company’s financial standing these are expected to be reduced as compared to previous years’ bonuses.
"As we continue to navigate macro-economic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programmes," Intel told IT Pro.
"These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy. We are grateful to our employees for their commitment to Intel and patience during this time as we know these changes are not easy."
Intel’s move to cut salaries at this stage rather than engage in mass layoffs has put it out of step with the strategies of other large tech firms.
2023 has already seen a number of large firms slash staff, as Amazon and Salesforce fired a combined 26,000 employees and Google cut its global workforce by 12,000 roles.
A number of factors are behind this wave of big tech layoffs, including unsustainable business models and a drive for greater profit at the expense of employee security. As recession bites, more firms are expected to engage in cuts of this kind.
This article was updated to include comment from Intel.
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