By Jeff Dorsch, Contributing Editor
Intel reported net income of $2.0 billion in the first quarter, up 3 percent from a year earlier, while revenue rose 7 percent to $13.7 billion, compared with $12.8 billion one year ago.
The company also announced that it is embarking on an extended restructuring program, eliminating up to 12,000 positions around the world, a reduction in force of about 11 percent, by mid-2017. The cutbacks will include a consolidation of facilities with involuntary and voluntary departures by employees.
“Our first-quarter results tell the story of Intel’s ongoing strategic transformation, which is progressing well and will accelerate in 2016,” Intel CEO Brian Krzanich said in a statement. “We are evolving from a PC company to one that powers the cloud and billions of smart, connected computing devices.”
Intel will focus on its growth businesses – namely, data center, Internet of Things, field-programmable gate arrays, and memory – under the restructuring initiative. The company will realize cost savings of $750 million in 2016 and estimated annual savings of $1.2 billion.
“These actions drive long-term change to further establish Intel as the leader for the smart, connected world,” Krzanich stated. “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.”
Chief Financial Officer Stacy Smith told analysts the restructuring will make Intel “more agile, more efficient…and more profitable.”
Smith plans to take another post in Intel’s senior management within the next few months. He will be leading sales, manufacturing, and operations once a successor is named as CFO.
Intel said it would consider internal and external candidates for the CFO post.
The company’s second-quarter outlook calls for $13.5 billion in revenue, plus or minus $500 million, with a gross margin percentage of 61 percent. Intel will take a restructuring charge of about $1.2 billion during Q2.
A “weak PC market” in Q1 led to the Client Computing Group posting revenue of $7.5 billion, increasing 2 percent from a year ago yet down 14 percent from the fourth quarter of 2015, Smith said.
The Data Center Group realized Q1 revenue of $4.0 billion, a 9 percent gain from a year earlier. The Internet of Things Group had revenue of $651 million, up 22 percent year-over-year.
Revenue in the Non-Volatile Memory Solutions Group was $557 million, down 6 percent from a year earlier, while the Intel Security Group had Q1 revenue of $537 million, a 12 percent gain from a year ago.
The Programmable Solutions Group, formerly known as Altera (acquired by Intel in late 2015), had $359 million in revenue, not including $99 million in revenue due to acquisition-related adjustments.
Betsy Van Hoes of Wedbush Securities said, “It’s been a long time since there’s been a restructuring of the company. As they forge forward, they need to pare down and invest in the right area. As much as I hate that — it’s terrible for people who are laid off, that — for the investors it’s positive.”