back to article For its big comeback, Intel needs to spend money – and it's making less and less of it

For a company hoping to make a grand comeback in a few years, things are not looking great for Intel. On Thursday, it announced plans to lay off staff and cut billions of dollars in spending after its third-quarter revenues fell 20 percent, year on year, and profit plunged 85 percent. This comes after the American …

  1. Anonymous Coward
    Anonymous Coward

    They better have those new processes in the can already

    Otherwise these cuts will put them in a bad place if the process nodes they are trying to bring to market founder again. Only they know what is in the skunk works at the moment, so we will have to wait and see. That said, based on their track records, re-investing in the teams getting results and pruning the ones that were happy to cash checks without delivering for the last few years is tough to ague with.

    The trick is, does management have the chops to pick the right horses to back. Seems like there is some underperforming dead weight there too.

    1. Anonymous Coward
      Anonymous Coward

      Re: They better have those new processes in the can already

      "Only they know what is in the skunk work..."

      Well, we know the successor to "Lake" is literally on the Rapids and drowning in delay. We also know Intel is working on their next GPU while the first ones aren't even stable. We also know they're trying to get billions of free dollars to sustain this broken business model. It's all.kind of a joke.

    2. Strahd Ivarius Silver badge

      Re: They better have those new processes in the can already

      there is some underperforming dead weight there too

      You are speaking of the upper management or the beancounters?

      1. UCAP Silver badge

        Re: They better have those new processes in the can already

        Both

      2. Evilpaul

        Re: They better have those new processes in the can already

        They aren't spending billions on the accounting department.

    3. Anonymous Coward
      Anonymous Coward

      Re: They better have those new processes in the can already

      Intel is a huge company - over 100,000 people before layoffs - and it's hard to quickly move or course correct something that large.

      There is often a lot of bureaucracy and process embedded at big companies like that, sometimes they have a tough time even getting out of their own way. Especially if they're top- and middle-heavy with management. It may not be accurate anymore, but Intel used to have a reputation for having a lot of (too many?) middle-managers.

      What looks like "under-performing dead weight" is sometimes employees in the trenches struggling to get things done under the overwhelming weight of the corporation.

  2. Anonymous Coward
    Flame

    Investment

    Without getting into Intel's competitors, the item that caught my eye was:

    "Investors aren't keen on how Gelsinger's comeback plan will drag down gross margins and cause Intel to become cash-flow negative this year, then neutral the next two years, before the company expects to truly enjoy the results of its investments."

    So much of what is wrong with our industry, heck, with the economy, is the perversion of the concept of investment.

    When "investment" becomes a quarterly or yearly concept it is no longer a true investment. True investments take years to make and, once made, last for years more.

    It was the beancounters that dragged Intel into this mess and I had hopes when Gelsinger, an Intel engineer, took over. But now it seems like the beancounters on Wall Street are intent on pulling the rug out from under him.

    1. Pascal Monett Silver badge
      Mushroom

      Re: Investment

      Totally agree.

      How can you not be happy that the CEO has a solid plan to get back to profits ?

      Yes, it will take some time and your revenues will decline, but do you prefer that the company just fold right away ?

      Investors. Worse than beancounters.

    2. Binraider Silver badge

      Re: Investment

      This is a large, established household name. If they can’t deliver stable dividend; of course investors will look elsewhere.

      Intels product lineup is enormous and, I suspect, part of the problem. Downturn in PC sales equals downturn across the entire lineup.

      Competition beating them at their own game is also a factor; though even I will concede for certain applications current intel does beat AMD.

  3. Lordrobot

    Remember Drydee Diapers?

    The CEO of UNION CARBIDE... the company now dead and buried, wanted to get into the Proctor and Gamble space with Diapers. And some genius named them Drydees.

    Intel has now scrapped the future. Once the king of CPU's they allowed AMD to get a pricing foothold. Intel thought they were building cars so they invented the Celeron which was a cheap underpowered Chevy while selling overpriced Cadillacs at the other end and nothing in between that is NOTHING BUT AMD who became Toyota.

    After 90 Billion in stock buybacks, the Intel Board brings back Patrick Gelsinger, a retread from the 1980s as if he is the second coming of Steve Jobs. And for his Drydees debut, Gelsinger has punked with the Gov on FAB a low-margin business that is labour-intensive. The perfect type of industry to AVOID. It's the Diaper Business all over again.

    Intel certainly has had help from the Federal Gov on destroying its market share. Obama Blocked Intel CPUs that were under Contract by a Chinese firm to build a Supercomputer. There were no secrets, the Chinese requested the chips for this purpose. Obama the great economic genius blocked the sale and 15 months later China was building their own powerful RISC Chips and won the honours of the fastest supercomputer. This effort by the gov to block intel led to INTEL missing the entire handheld market. Asia did not want to be dependent on Intel that politicians controlled.

    Then Intel failed at 5G chips, failed at 10nm fab [oh but they are not going to lead the world with 2nm Fab out of Ohio!]. One fail after another but plenty of buybacks. Then Intel Board picks this born-again nut job who has all his focus on FAB while the Intel business units pitch into the sea. Narrow Gated Fab is easily handled by two companies, TSMC and Samsung. Nothing is changing in Asia. Asians who make the electronics and assemble the consumer and server products do not want US components that could be blocked or come under political pressure by US Politicians.

    Look at Trump. He was so stupid he didn't know that Android was open-source. Blocking Android only harmed Google's special services. Meanwhile, Huawei developed Android Harmony and replaced all the Google Services with Chinese Domestic Services. Trump was an uninformed idiot. Biden is just following the same protectionist path so US Semiconductors are cooked. Who is suffering? US Semiconductor companies. And even with politicians trying to control ASML and other foreign firms, The demand for US Semiconductors continues to decline.

    If you were a phone maker in the North Pole, would you use US-made Semiconductors in your phones? NO because at a whim any politician in Murica could punish your company because of some dispute over natives hunting Polar Bears. This is just this CRAZY WOKE economics now common to both Dems and Republicans. There are no free traders left in Murica... only half-cocked nuts that destroy major US industrial sectors over meaningless WOKE crap and personalities. Asia is not WOKE... It is competitive so they are not buying your BBQ.

    Trump and Biden tried to destroy Huawei even resorting to Kidnapping the Founder's daughter. Yet compare the profits of Huawei in the last quarter and the losses of Intel. Protectionism only destroys domestic businesses. Huawei has 40% of the US Sanctioned world to sell their products without competition. Sanctions force US businesses to pull out of those markets. All that effort by companies to build those markets was destroyed in minutes by some dumb politician.

    Intel is pitching into the sea. The incredible stupidity of the INTEL CEO to enter FAB where Intel has already failed at 10nm, in Ohio of all places, where independent cost estimates say Intel's fab will cost 300% more than Asian Fab, is selling Drydees at 3x the cost of Pampers. The math doesn't work.

    Intel wants to compete with NVIDIA for GPUs, a business already being blocked by Dumb US Politicians. What is the net result? Chinese Biren Technology has a BR100 that compares very favourably with the NVIDIA line. Biden banning US GPUs only harms NVIDIA and INTEL's pretend future business. Intel will not catch NVIDIA and Biren Technology has free access to the giant Asian markets and it's just a startup and only four or five years old. NVIDIA needs to leave the US to save itself from US Political ruin.

    Gelsinger is Intel's "Ginni" Rometty. The Board can wait until GINNI GELSINGER destroys the company or they can get rid of him fast. Gelsinger is now in Ax mode, undoubtedly cutting the wrong business groups and pushing the insane Ohio fab lunacy. This is a departure from Intel Core business like no other. It is how GINNI ROMETTY converted IBM from a viable business into a Corpse. Always promise the future... Promise the Drydees.

    “Sweatpants are a sign of defeat. You lost control of your life so you bought some sweatpants.”

    Karl Lagerfeld

    Gelsinger is in bed with the dumbest US Politicians. He is feeding their Marxist Protectionism Lunacy repackaging it as "rebalancing." Protectionism only gives China and Asia the incentive to develop their own competing products. Imagine the US has sanctions on 40% of the world's population or roughly 3.2 billion people. this 3.2 Billion market was removed by Dumb US politicians from the reach of American companies. That void is going to be filled by China and Asian competitors.

    Gelsinger gets a lot of press but every time he opens his mouth the rest of the US Semiconductor businesses cringe. The Intel downward spiral is accelerating.

    1. Anonymous Coward
      Anonymous Coward

      Re: Remember Drydee Diapers?

      Whenever I read a massive rant that includes the word “Woke” and accuses non-Marxists of being “Marxist” I realise I’ve just been conned into temporarily taking something seriously, that in actuality is just the vein-popping rantings of a (probable) narcissistic (definite) know-it-all. Hope you feel better soon.

    2. b0llchit Silver badge
      Childcatcher

      Re: Remember Drydee Diapers?

      I am truly sorry that the pills in the USA are too expensive.

      It might be an option to take across the border into Canada or a European trip to fill the bottle with pills. However, that undermines your economy just a bit more. No sale at home because it is to expensive and no sale abroad because it is not patriotic.

      Yes, Ok then, please continue to rant. I'll have the drool-and-spit bucket ready.

  4. Anonymous Coward
    Anonymous Coward

    Today interests rates are jacked up to deliberately strangle consumption, but also investment will be strangled.

    Tomorrow we'll get more QE (printing money) or psuedo-QE (reducing bank reserve requirements) to flood the market ($2 trillion in 2019-2020). But that won't fix long term investment - because what happens is that financial industry invests that in dumb instruments with low investment to revenue profiles because they must plan to ride the stock market surge that results from the stimulus, but want to be ready to dump when the stimulus runs out. That necessarily precludes long term investment in plant.

    Uber had no problem accumulating $40 billion in assets. Intel cannot.

    To be fair, the stimulus does help in moonshot basic research and high end intellectual property, which is not a loss - but it is not enough either.

    From a recent guest opinion piece in the NYT "How China Is Fighting the Chip War With America" - An American-style financialization and service-oriented economy is not what the Chinese leadership thinks can ensure national strength and security. That makes a lot of sense, but US politicians are mostly in pocket of finance and profit handsomely from it.

    IMO - the US should deprecate the queen bee status (tax breaks) given to the financial industry and replace those with bigger tax breaks for developing domestic plant and hiring US labor. Also the cost of labor for work involving traditional employees learning skills should not be penalized relative to the cost of gig workers - (social security, on-the-job liabilities, health ins, etc) - which would require a major rewrite of the employment system.

  5. gnasher729 Silver badge

    Lucky with Apple

    Apple is right now building chips that kill Intel. Macs were probably 8 percent of intel’s chips, and they didn’t buy any celerons, switching to arm will have hurt Intel. Where Intel is lucky is that Apple wants to keep all these chips to themselves. I don’t know how easy it is to switch from Intel windows to arm windows, but if apple sold to pc makers that would be disaster for Intel.

    1. David Lawton

      Re: Lucky with Apple

      This really won't have helped. Apple usually ships around 4 million Mac's a quarter. so Intel has lost 16 Million chip sales a year and most of those were Intel's higher end chips (i5/i7/i9) .

    2. Binraider Silver badge

      Re: Lucky with Apple

      Apple hardware is great. Price, and certain features of the OS not so much.

      Apple isn’t going to kill intel. Intel will kill intel - if it does not get its act in gear.

  6. Evilpaul

    They can sell some of those shares they spent $60bn dollars buying back to get the executives big bonuses to raise cash.

    1. msroadkill

      60 BILLION DOLLARS!!!

      I am amazed its legal.

  7. NeilPost

    ARM

    “But it's also clear the chipmaker continues to face competitive pressure from x86 rival AMD as well as organizations that are making Arm-based processors, such as Apple, Amazon, and Ampere Computing.”

    https://www.theregister.com/2006/06/27/intel_sells_xscale/

    Catastrophic strategic error, from at the time the ARM market leader and just a few months before the iPhone launched…. and a pittance is all they sold but it for.

    I’m sure despite all the doom and gloom and spending at Intel, Gelsinger will pocket health Exec pay rises and stock option grants.

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