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A Year After Layoffs, Intel Bounces Back

It was a year ago Wednesday that Intel announced it would cut 10,000 jobs worldwide. Analysts estimated those job losses would translate to about 1700 positions in Oregon, where the company has a large research and development presence.

At the time, Intel’s main competitor had just released a new chip, which was proving to be a much better seller.  
But a year is a long time in the tech sector and as Kristian Foden-Vencil reports, the company has since released two new chips and is hiring again.

At the end of 2005, Intel unveiled its new 64-bit chip. It was more powerful and faster than previous microprocessors, but there was a problem. Anyone who wanted to use one, had to buy new software.

At the same time, Intel’s archrival Advanced Micro Devices came out with its own new chip, which could also run 64-bit programs. But the AMD chips would also run older 32-bit programs — meaning customers didn’t have to buy new software.

Intel’s sales suffered. Spokesman Bill McKenzie outlined plans to lay off 10,000 workers.

Bill McKenzie: “We are going to be implementing a number of steps that we anticipate will save Intel about $2 billion next year and about $3 billion the year after that. Part of those savings we expect will come from reducing our workforce by about 10,500 people by the middle of 2007.”

A year later, those cuts have now been made — including about a thousand in Oregon, and Intel’s outlook has changed.

Sound of Intel Advertisement: “Great computing starts with Intel inside."

David Schue: “On an overall basis, they’re doing better than they were last year.”

David Schue is a portfolio manager at Cascade Investment Advisors in Portland.  He says Intel’s new Core Duo and Quad chips are doing well. The reason — each processor actually contains two chips — meaning it has two brains.

Older chips used to freeze and crash the computer. Now, with two brains, if one freezes, the other can keep the computer going while the first reboots.

David Schue: “They have come out with a new batch of products and they have been very well received in the marketplace. They may have actually been behind AMD a little bit in terms of technology for a little while, but they seem to have caught back up again in terms of buyers in the market place.”

Schue says that while cutting positions was hard for individual workers, it was a good thing for Intel.

David Schue: “They’re actually able to make as many chips as they can sell with fewer employees. So their expenses have gone down, which has helped their profits, and they’ve reinvested that money in developing new chips, research for that. And also one of Intel’s big advantages is their manufacturing plants are very modern and up to date. It costs a lot of money to buy that equipment.”

Indeed, much of the research and development that went into the new core duo chips was done at Intel’s plants in Washington County. Company spokesman, Bill MacKenzie, says the need for that R&D meant that the company had to cut about 700 fewer jobs than some had feared. And now, Intel is actually doing some limited recruiting.

Bill MacKenzie: “We’ve regained market share that we had lost — and then some — as a result of not focusing enough on our core business. In the past year or so we have clearly come out with some really high performing products and we’re continuing to evolve with those products.”

Proof can be seen when looking at the sales figures for Intel's competitor, AMD. That company is not continuing to gain market share at the rate it was a year ago. 

Meanwhile, Intel continues to employ almost 16,000 Oregonians — a number the company says, isn’t expected to drop again any time soon.

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