Intel shocked employees Tuesday night by telling them it was cutting employee compensation sharply after announcing miserable financial results last week.
The chipmaker said it will cut base pay for employees above its middle ranks by at least 5% starting March 1, according to employees who heard the company’s announcement. Vice presidents will get a 10% cut, senior executives will get a 15% discount, and CEO Pat Gelsinger will get a 25% cut from his base salary.
Hourly employees do not receive a pay cut and annual bonuses will remain. But Intel is immediately removing other incentives for all employees.
He suspended merit increases for all employees, suspended quarterly profit-sharing bonuses and employee recognition programs, and cut 401(k) retirement plan matching payments in half, to 2.5% .
“These changes are designed to have a more meaningful impact on our executive population and will help support the investments and overall workforce needed to accelerate our transformation and deliver on our long-term strategy,” said Will Moss, Chief Executive Officer. -word from Intel, in a written press release. “We are grateful to our employees for their commitment to Intel and their patience during this time, as we know these changes are not easy.”
The SemiAnalysis website first reported Intel’s pay cuts, which follow layoffs announced by Intel last fall. Intel did not reveal how many people lost their jobs in Oregon, its largest site, but the company reported more than 500 layoffs in California.
The chipmaker sought to eliminate $3 billion in spending amid a sharp drop in demand for microprocessors from PC makers and data center operators in 2022.
Intel’s outlook continued to darken. The company said Thursday that sales were down 32% last quarter and expects revenue to fall 40% this quarter compared to the same period a year ago.
“We realize we stumbled, we lost (market) share, we lost momentum,” Gelsinger told Wall Street analysts last week. But he said Intel thinks the worst is over: “We think it’s stabilized this year.”
Investment analysts have warned that Intel’s “abysmal” financial results could prompt the company to cut its quarterly dividend, which could trigger a sell-off in the stock.
Reducing employee compensation could help shore up Intel’s finances without more layoffs, but it could also cause workers to leave the company for new jobs. Stock-based compensation is a large part of Intel’s total pay package, and workers had previously faced a sharp drop in Intel’s stock price.
Intel shares closed Tuesday at $28.26, just over half their value last spring.
Tuesday’s news is also certain to devastate morale.
Employees said Gelsinger delivered the message in a somber, company-wide speech Tuesday night. They said he was seeking to rally employees by referring to the difficult times Intel endured in the 1980s, before it became the world’s dominant chipmaker. He suggested the cuts could be reversed if Intel’s fortunes improve.
Intel has lost pole position in the industry over the past few years after a succession of manufacturing stumbles, and it’s far from clear whether Gelsinger can stage another comeback. The company has pledged to spend billions of dollars on new factories in Arizona, Ohio and Europe and says it has picked up the pace to introduce new generations of its chip technologies.
But rival Taiwan Semiconductor Manufacturing Co. continues to make advances of its own, and many other chip companies, including AMD and NVIDIA, contract with TSMC to manufacture their chips. This has allowed them to take market share from Intel even as the broader market cools.
Intel did not specify the number of workers eligible for pay cuts, but Intel’s compensation structure is heavily skewed toward its upper ranks. The cuts will have a profound impact in Oregon, home to Intel’s most advanced research and more than 20,000 employees.
In a rough calculation, the state economist Josh Lehner estimated Intel’s pay cuts could reduce Oregon’s overall salaries by $150 million to $200 million, or about 0.15% of all salaries in the state.
–Mike Rogoway | mrogoway@oregonian.com | 503-294-7699
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