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Why Intel Cut Some IT Jobs

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Apr. 3 2019, Published 11:54 a.m. ET

Intel is cutting hundreds of jobs

Chip giant Intel (INTC) is reportedly cutting jobs from its headquarters as the company is looking to consolidate some of its operations with India-based (INDA) IT contractor Infosys. In the past, the company has run operations by working under IT contractors.

The company has not given details about the exact number of layoffs. However, according to sources, more than 100 IT workers might be impacted across a number of the company’s US facilities as well as an administrative facility in Costa Rica. Intel had approximately 107,400 workers at the end of 2018, 5,000 more than the 2017 year-end period.

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Intel’s struggles

The chipmaker is facing chip supply issues due to manufacturing process issues. Plus, soft smartphone demand due to waning iPhone sales is likely to hurt Intel’s new modem business. Intel’s data center demand is also slowing down and might weigh on Q1 2019 results too. Trade war fears also have pressurized chip stocks due to a possible supply glut in chips. Moreover, competition from Advanced Micro Devices (AMD) is likely to threaten Intel’s position in the server CPU market.

Slower cloud demand is expected to pressurize the company’s results in the first half of 2019. Nevertheless, the company expects the trend will improve in the second half.

Dividends

Despite struggles, Intel has been rewarding its shareholders through share buybacks and dividends for the past several quarters and has returned nearly $16.3 billion to shareholders through dividends and share buybacks in 2018. Intel has also hiked its annual dividends by 5% in the last quarter. The new dividend of $1.26 per share represents a yield of 2.32% on April 2. Peers Qualcomm (QCOM), Broadcom (AVGO), and NVIDIA (NVDA) have dividend yields of 4.27%, 3.50%, and 0.35%, respectively.

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