Intel to Cut 12,000 Jobs, Shift Focus to Meet Mobile

Chip maker says removing up to 11% of workforce continues its move away from PCs

Intel Corp. INTC -0.16 % is planning to slash 12,000 jobs, 11% of its workforce, a consequence of the shrinking personal-computer market and the chip maker’s failure to take advantage of the industry’s transition to smartphones.

The restructuring announced along with first-quarter results on Tuesday is Intel’s largest yet in terms of the number of employees affected.

Chief Executive Brian Krzanich described the move as tough but necessary, not only to cut costs but to free up money to invest in businesses that are growing.

“These are not changes I take lightly,” Mr. Krzanich wrote in an email to employees. “We are saying goodbye to colleagues who have played an important role in Intel’s success.”

Intel’s troubles reflect a common challenge in the technology business. Companies that lead one generation of computing often struggle in the next. International Business Machines Corp., for example, led in large mainframe systems but was forced to stop selling PCs and low-price server systems as competition wrung profits from the business.

Intel, based in Santa Clara, Calif., since the late 1980s provided the calculating engines for a PC market that kept expanding. The chip maker, along with partner Microsoft Corp., were able to cream off the vast majority of profits from that growth.

But neither Intel nor Microsoft gained a foothold in the mobile market, which was transformed after Apple Inc. introduced the iPhone in 2007.

Makers of handsets overwhelmingly chose chips based on designs licensed from ARM Holdings PLC, which are available from a plethora of suppliers, and Google Inc.’s Android software, which is available free. No matter how good Intel or Microsoft products became, they could never counter those fundamental changes.

Sales of PCs, meanwhile, have been mainly declining since Apple’s iPad emerged in 2010. The market recently seemed to plateau, but sales again dropped in the first quarter, falling nearly 10%, Gartner Inc. estimated.

The continuing decline has forced Intel to focus on growth areas such as computers for data centers and non-computer devices outfitted with data processing and communications capabilities, known as the Internet of Things.

“They’ve looked at the decline of the PC market and clearly decided that they are going to put most of their effort elsewhere,” said Rob Enderle, a market research who heads the Enderle Group.

Though PC weakness is the immediate trigger for the cost cuts, the flip side of Intel’s situation “is missing the mobility boat,” said Roger Kay, an analyst at Endpoint Technologies Associate.

Some analysts expect Intel to win a share of Apple’s purchases of wireless chips, but Mr. Krzanich isn’t betting that growth will come from smartphones. He reiterated Tuesday that Intel is expecting growth to come from selling chips for servers and other gear related to cloud computing—long the company’s healthiest business—along with chip sales for the Internet of Things.

Intel also is placing greater emphasis on memory chips as well as programmable processors acquired along with its recent purchase of Altera Corp. That deal, along with an extra reporting week in the quarter, helped Intel’s revenue and bottom line in the period.

In all, Intel reported that profit for the period ended in March rose 3% to $2.05 billion, or 42 cents a share, up from $1.99 billion, or 41 cents a share, a year earlier. Revenue essentially was flat, at $12.8 billion.

Intel’s projections were more worrisome. The company said it expects second-quarter revenue of $13.5 billion, plus or minus $500 million. Analysts polled by Thomson Reuters expected revenue of $14.16 billion.

Excluding certain items, the company reported per-share earnings of 54 cents and revenue of $13.7 billion. Analysts polled by Thomson Reuters expected per-share profit of 48 cents and revenue of $13.8 billion.

For 2016, the company lowered its revenue guidance to growth in the mid-single digits, from its previous estimate for revenue growth in the mid-to-high single digits.

Intel’s shares declined 2.4% in after-hours trading Tuesday.

“Investors are disappointed in the resetting of full-year-expectations,” said Bill Kreher, an analyst at Edward Jones.

The company also said its chief financial officer, Stacy Smith, will transition to a new role leading sales, manufacturing and operations after the company identifies a successor. Mr. Smith, a 28-year Intel veteran, said in an interview that he was excited by the new responsibilities.

Mr. Krzanich has been trying to bring new talent into the company, while some long-term employees are heading for the exits. The company recently announced the planned departures of Kirk Skaugen, who leads sales of chips for PCs and mobile devices, and Doug Davis, who heads its Internet of Things group. Former Qualcomm Inc. executive Murthy Renduchintala was hired in November to a position that required those executives to report to him.

Despite declining unit shipments in the PC market, Intel benefited as customers picked its newer, more expensive chips. Revenue in Intel’s client computing group, which includes chips for personal computers and mobile devices, rose 1.7%.

In the company’s data-center group, the area that includes chips for servers, sales rose 8.6% to $4 billion on volume growth of 13%, slightly offset by a 3% decline in average selling prices.

Intel said the job cuts include the consolidation of operations globally, along with layoffs and voluntary departures. Intel plans to notify most of the affected employees over the next 60 days, with some actions carrying over into next year.

The company aims to save $750 million this year, with annual run-rate savings of $1.4 billion by mid-2017. It plans to post a second-quarter charge of $1.2 billion related to the cost-cutting program.

Write to Don Clark at and Tess Stynes at