Intel shocked employees Tuesday night by announcing that it would sharply cut employee compensation next Reporting miserable financial results last week.
The chipmaker said it will cut base pay for employees above mid-level ranks by at least 5% starting March 1, according to employees who heard the company’s announcement. Vice presidents will take a 10% cut, more senior executives will take a 15% cut, and CEO Pat Gelsinger will take a 25% cut in his base pay.
Hourly employees do not take a pay cut and annual bonuses will remain. But Intel is cutting other incentives for all employees effective immediately.
It suspended merit raises for all employees, suspended quarterly profit-sharing bonuses and employee recognition programs, and cut its 401(k) retirement plan matching payments in half, to 2.5%.
“These changes are designed to impact our executive team further and will help support investments and the overall workforce to accelerate transformation and achieve our long-term strategy,” Intel spokesman Will Moss said in a written statement. “We are grateful to our employees for their commitment to Intel and for their patience during this time because we know these changes are not easy.”
SemiAnalysis website I first reported Intel salary cuts, which came on the heels of layoffs announced by Intel last fall. Intel hasn’t disclosed how many people have lost jobs in Oregon, its largest location, but the company has reported more than 500 layoffs in California.
The chipmaker has sought to chip away at $3 billion in spending amid a sharp decline in microprocessor demand from computer manufacturers and data center operators through 2022.
Intel’s gaze continued to dim. The company reported Thursday that sales fell 32% in the most recent quarter, and it expects a 40% drop in revenue this quarter compared to the same period last year.
“We realize we’ve stumbled, we’ve lost (market) share, we’ve lost momentum,” Gelsinger told Wall Street analysts last week. But he noted that Intel believes the worst is over: “We feel that has leveled off this year.”
Investment analysts warn That Intel’s “terrible” financial results could prompt the company to cut its quarterly dividend, which could lead to a major stock sell-off.
A cut in employee compensation could help prop up Intel’s finances without more layoffs, but it could also push workers to leave the company for new jobs. Stock-based compensation is an important part of Intel’s overall pay package, and workers have already experienced the sharp drop in Intel’s share price.
Intel shares closed Tuesday at $28.26, just over half of their value last spring.
Tuesday’s news is also sure to destroy morale.
Employees said Gelsinger delivered the letter at a sad, company-wide address on Tuesday night. They said he sought to rally staff by pointing to the tough times Intel went through during the 1980s, before it emerged as the world’s dominant chipmaker. He noted that the cuts could be reversed if Intel’s fortunes improve.
Intel has lost its lead in the industry over the past few years after successive manufacturing stumbles, and it’s unclear if Gelsinger can engineer another comeback. The company has committed to spending billions of dollars on new plants in Arizona, Ohio and Europe and says it has picked up the pace to introduce new generations of chip technologies.
But Taiwan Semiconductor Manufacturing Co., Ltd. The competition continues to make its own inroads, and many other chip companies, AMD and NVIDIA among them, contract with TSMC to make their chips. This enabled them to capture market share from Intel even as the broader market cooled.
Intel hasn’t said how many workers qualify for pay cuts, but Intel’s compensation structure is weighted heavily toward the higher 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’s economist Josh Lehner appreciated Intel’s salary cuts could cut total wages in Oregon by $150 million to $200 million — about 0.15% of all wages statewide.
– Mike Rogoy | [email protected] | 503-294-7699
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