Intel shocked employees on Tuesday night with the news that it will slash employee salaries after reporting miserable financial results last week.
The chipmaker said it will cut base pay for employees above its middle ranks by at least 5% effective March 1, according to employees who heard the company’s announcement. Vice presidents will get a 10% cut, senior executives will get a 15% cut, and CEO Pat Gelsinger will get a 25% cut to his base pay.
Hourly workers will not receive a pay cut and annual bonuses will remain. But Intel is removing other incentives for all employees, effective immediately.
It suspended benefit increases for all employees, suspended quarterly profit-sharing bonuses and employee recognition programs, and cut 401(k) plan-matching payments in half to 2.5%.
“These changes are intended to have a greater impact on our leaders and help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy,” Intel spokesman Will Moss said in a written statement. “We are grateful to our employees for their dedication to Intel and their patience during this time, as we know these changes will not come easy.”
The SemiAnalysis website first reported on Intel’s pay cuts following the layoffs Intel announced last fall. Intel didn’t disclose how many people lost their jobs in Oregon, its largest location, but the company reported more than 500 layoffs in California.
The chipmaker sought to save $3 billion in spending amid a sharp drop in microprocessor demand from PC makers and data center operators in 2022.
Intel’s outlook has clouded over further. The company reported Thursday that sales fell 32% in the most recent quarter, and it expects sales for this quarter to fall 40% from the same period last year.
Investment analysts have warned that Intel’s “terrible” financial results could prompt the company to cut its quarterly dividend, which could trigger a major sell-off in the stock.
The cut in employee pay could help shore up Intel’s finances without more layoffs, but it could also force workers to leave the company for new jobs. Stock-based compensation is an important part of Intel’s overall pay package, and workers have already grappled with a sharp drop in Intel’s stock price.
Intel shares closed at $28.26 on Tuesday, a little more than half their value last spring.
Tuesday’s news is sure to destroy morale as well.
Employees said Gelsinger delivered the message in a somber, company-wide address Tuesday night. They said he tried to rally employees by citing hard times Intel went through in the 1980s before it rose to become the world’s dominant chipmaker. He suggested the cuts could be reversed as Intel’s fortunes improve.
Intel lost its industry pole position in recent years after a series of manufacturing stumbles, and it’s far from clear whether Gelsinger can pull off another comeback. The company has committed to spending billions of dollars on new factories in Arizona, Ohio and Europe and says it has accelerated its pace in rolling out new generations of its chip technologies.
However, rival Taiwan Semiconductor Manufacturing Co. continues to make its own advances, and many other chipmakers, including AMD and NVIDIA, are signing deals with TSMC to manufacture their chips. That has allowed them to take market share from Intel even as the broader market cools.
Intel hasn’t said how many workers will qualify for the pay cuts, but Intel’s pay structure is heavily biased towards the upper echelons. The cuts will have a profound impact on Oregon, home to Intel’s most advanced research and more than 20,000 employees.
– Mike Rogoway | [email protected] | 503-294-7699
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