Intel cuts wages, bonuses after disastrous quarterly results

Intel shocked workers on Tuesday evening that it is slashing workers’ compensation after reporting dismal financial results last week.

The chipmaker said it will cut base pay for above-mid-level employees by at least 5% starting March 1, according to employees who heard the company’s announcement. Vice presidents get a 10% cut, more senior executives get a 15% haircut, and CEO Pat Gelsinger gets a 25% cut off his base salary.

Hourly workers do not receive a pay cut and annual bonuses are maintained. But Intel is immediately removing other incentives for all employees.

It has suspended pay increases for all employees, suspended quarterly profit-sharing bonuses and employee recognition programs, and halved 401(k) retirement plan benefits to 2.5%.

“These changes are designed to give greater impact to our executives and will help support the investments and overall workforce required to accelerate our transformation and deliver on our long-term strategy,” Intel spokesperson Will Moss said in a written statement. “We are grateful to our employees for their dedication to Intel and their patience during this time, as we know these changes are not easy.”

The website SemiAnalysis first reported Intel’s pay cuts following the layoffs Intel announced last fall. Intel didn’t disclose 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 manufacturers and data center operators in 2022.

Intel’s outlook has darkened further. The company reported on Thursday that sales fell 32% last quarter and expects a 40% drop in sales 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 indicated that Intel believes the worst is over: “We feel this year has stabilized.”

Investment analysts have warned that Intel’s “horrible” financial results could lead the company to cut its quarterly dividend, which could lead to a major sell-off in the stock.

Cutting employee compensation could help bolster Intel’s finances without more layoffs, but it could also push employees to leave the company for new jobs. Share-based compensation represents a significant portion of Intel’s total compensation package, and employees have already suffered a sharp decline in Intel’s share price.

Intel shares closed at $28.26 on Tuesday, just over half their value from last spring.

Tuesday’s news is sure to wreak havoc on morale, too.

Employees said Gelsinger delivered the message in a somber, company-wide speech Tuesday night. They said he was trying to mobilize workers by citing the hard times Intel went through in the 1980s before emerging as the world’s dominant chipmaker. He suggested that the cuts could be reversed if Intel’s fortunes improve.

Intel lost pole position in the industry in recent years after a series of production failures, and it’s far from clear whether Gelsinger can stage another comeback. The company has committed to spending billions of dollars on new factories in Arizona, Ohio and Europe and says it has stepped up the pace for the introduction of new generations of its chip technologies.

But rival Taiwan Semiconductor Manufacturing Co. continues to make its own strides, and many other chip companies including AMD and NVIDIA contract with TSMC to make their chips. That has allowed them to wrest market share from Intel even as the broader market cools.

Intel hasn’t said how many employees are eligible for the pay cuts, but Intel’s pay structure weighs heavily on the senior ranks. The cuts will have a major impact in Oregon, home to Intel’s most advanced research and more than 20,000 employees.

In a rough calculation, state economist Josh Lehner estimated Intel’s wage cuts could cut Oregon’s total wages by $150 million to $200 million — about 0.15% of all wages statewide.

–Mike Rogoway | | 503-294-7699

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