Intel shares plunge nearly 30% after announcing plans to cut 15,000 jobs

Intel revealed on Thursday severe plans to reduce the number of employees and its capital expenditure in an attempt to stabilize its financial situation, as it faces the latest setback in its slow recovery strategy. This has had a negative impact on its shares.

Emergency cost-saving measures include a 15% reduction in its workforce, That is, around 15,000 jobs, which is the majority of the positions eliminated this year. To shore up its weakened finances, Intel also canceled its dividend and announced an unexpected reversal in its growing capital spending, with investments this year likely to be 20% lower than expected.

Consequently, Shares of the chipmaker were down more than 20% before the market opened and exceeded the 10% drop it posted after its last earnings report and reflected another major blow to Wall Street’s confidence that CEO Pat Gelsinger can execute his ambitious turnaround plan. With operations already underway, the firm’s shares fell 27.8%.

Intel: what the market is looking at

While Most analysts have given him high marks for steering Intel through prolonged weaknesses in its underlying manufacturing process technology.has had less success in regaining market share lost to rival AMD or capitalizing on growing demand for artificial intelligence chips.

Intel blamed its latest setback in part on production issues related to its Meteor Lake processorsthe first generation of its chips manufactured with the new ultraviolet lithography technology on which it has based its recovery.

Analysts estimate that The company had completed the necessary “recovery” expenditure to become more competitive again and was in a position to tailor its investment more closely to the near-term demand outlook, leading it to adopt a more cautious stance.

Intel’s negative results

For the second quarter, lIntel revenue fell 1% to $12.8 billionbelow the $12.9 billion Wall Street had expected. David Zinsner, chief financial officer, said the latest figures reflected “gross margin headwinds from the ramp-up of our AI PC product, higher-than-usual charges related to non-core businesses and the impact of unused capacity.”

In pro forma termsIntel reported earnings of 2 cents per share, down from 13 cents a year earlier and below the 10 cents expected by analysts.

For the third quarter, the company said revenue will likely be $12.5 billion to $13.5 billion, with a pro forma loss of 3 cents per share. Wall Street had expected a profit of 13 cents a share on revenue of about $14.4 billion.

The dim outlook comes months after Intel received a pledge of $8.5 billion in direct funding from Washington to help cement its position as a national champion in the semiconductor industry, at a time when the U.S. has made rebuilding its advanced chip manufacturing base a national priority.

Intel said its long-term investment plans were shielded from its current weakness and that its efforts to regain a global leadership position in chipmaking technology by next year were still on track.