Intel Cuts Spending, Delays Raises
Tuesday, February 20th 2001, 12:00 am
News On 6
SAN JOSE, Calif. (AP) â€” Intel Corp. said Tuesday it will delay raises, cut back on hiring and slash spending, joining other high-tech companies in belt-tightening amid a slowing economy and sluggish personal computer sales.
The $34 billion chip making company hopes to save ``hundreds of millions of dollars'' with the cost-cutting measures, Intel spokesman Robert Manetta said. Layoffs are not part of the plan.
``The goal is to cut back so we can continue in investments that can bring us through this slowdown,'' he said.
The cutbacks did not surprise industry analysts, but the fact that the tech titan did not discuss the cost-cutting measures during its earnings report last month may mean the industry's outlook for the year remains bleak.
``We're seeing the belt tighten another notch. It's slight, but it's incrementally bad news for the overall sector,'' said Dan Scovel of Needham & Scovel, Inc. ``Something prompted them to do this; a sign of recovery may not be on the visible horizon at this point.''
Intel said it will limit hiring to only ``critical positions'' and pare its work force through attrition. The company's attrition rate is typically in the single-digit range, Manetta said.
The budget for research and development and capital spending will stay on target, but discretionary spending, such as overtime and travel expenses, will be reduced by 30 percent, the company said.
Intel also will delay springtime raises until October â€” when company officials hope to see a bounceback in the economy and technology purchases, Manetta said.
Senior-level employees won't get their raises until the fall, while non-managerial employees likely will receive half of their 2001 raises in the spring and the other half in the fall, Manetta said.
The Santa Clara-based company, which has a worldwide work force of 86,000, is the latest to pare expenses amid diminishing personal computer sales and a slowing economy.
Last week, Motorola Inc. announced plans to eliminate as many as 4,000 jobs from its semiconductor operations by year's end.
Also last week, Dell Computer Corp. slashed 1,700 jobs, about 4 percent of its work force. Last month, Gateway announced plans to cut 10 percent of its work force and Hewlett-Packard Co. said it would cut 2 percent of its work force.
Driven by the expansion of the Internet and demand for communications equipment, worldwide sales of semiconductors topped $200 billion in 2000, but record-setting sales were not expected to carry over into 2001 as the economy continues to slow and manufacturers report an excess of inventory, according to the Semiconductor Industry Association.
December sales were $17.9 billion, a 21.6 percent increase over 1999 but a 2.1 percent drop from November. The industry group said its 2001 forecast of 22 percent year-over-year growth probably will not be met.
Shares of Intel closed down $2.94, or 8.5 percent, to close at $31.44 Tuesday on the Nasdaq Stock Market. The decline was sparked by comments from Salomon Smith Barney analyst Jonathan Joseph, who said a semiconductor recovery in the second half of the year is ``overly optimistic.''
Intel stock slipped another 6 cents to $31.38 a share in after-hours trading.
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