Intel slashes wages, bonuses after disastrous quarterly results

Intel shocked employees Tuesday evening, saying it cut employee compensation sharply after reporting miserable financial results last week.

The chipmaker said it will cut the base pay by at least 5% for above-mid-level employees from March 1, according to employees who heard the company’s announcement. Vice presidents will receive 10% cuts, more senior executives will receive 15% less, and CEO Pat Gelsinger will receive a 25% reduction in base pay.

Hourly workers and other junior personnel Rank 6 and below in Intel’s ranking system do not take pay cuts. Annual bonuses will remain for all employees.

But Intel is cutting other incentives for everyone, effective immediately. Suspended merit payments for all employees, suspended quarterly profit-sharing bonuses and employee recognition programs, and halved 401(k) retirement plan matching payments to 2.5%.

“These changes are designed to more significantly impact our executive community and will 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 commitment and patience to Intel as we know these changes are not easy.”

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The website SemiAnalysis reported Intel’s pay cuts immediately after the layoffs Intel announced last fall. Intel did not disclose how many people lost their jobs in its largest site, Oregon, but the company reported more than 500 job cuts in California.

The chipmaker sought to eliminate $3 billion in spending in 2022 amid a sharp decline in microprocessor demand from computer manufacturers and data center operators.

Intel’s outlook continued to tarnish. The company reported on Thursday that sales fell 32% last quarter and expects a 40% decrease in revenue this quarter compared to the same period of the previous quarter.

“We realized that we stumbled, we lost our (market) share, our momentum,” Gelsinger told Wall Street analysts last week. But he noted that Intel believes the worst is over: “We think this has stabilized this year.”

Investment analysts have warned that Intel’s “terrible” financial results could lead the company to lower its quarterly dividend, which could trigger a massive sell-off in the stock.

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Cutting employee compensation may help support Intel’s finances without further layoffs, but it can also push employees to leave the company for new jobs. Equity-based compensation represents a significant portion of Intel’s overall pay package, and workers have already been battling the sharp decline in Intel’s share price.

Intel shares closed Tuesday at $28.26 and were worth a little more than half last spring.

Tuesday’s news will certainly break the morale.

Employees said Gelsinger delivered the message Tuesday evening in a somber, company-wide address. They said Intel sought to recruit employees, citing the tough times it endured in the 1980s before emerging as the world’s dominant chipmaker. He suggested the cuts could be rolled back if Intel’s chances improve.

Intel has lost its pole position in the industry over the past few years after successive manufacturing stumbling blocks, and it’s unclear whether Gelsinger can envision another comeback. The company has committed to spending billions of dollars on new factories in Arizona, Ohio and Europe, and says it’s accelerating the pace at which it introduces new generations of chip technologies.

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But rival Taiwan Semiconductor Manufacturing Co. continues to make their own progress, and many other chip companies, including AMD and NVIDIA, are contracting with TSMC to make their chips. This allowed them to take market share from Intel even as the broader market cooled.

Intel didn’t say how many workers qualify for pay cuts, but Intel’s compensation structure is heavily geared towards the top. The discounts will have a profound impact on Oregon, home to Intel’s cutting-edge research and 20,000+ employees.

By rough calculation, the state economist Josh Lehner prediction Intel’s wage cuts could reduce Oregon’s total wages by $150 million to $200 million—about 0.15% of all wages statewide.

— Mike Rogoway | [email protected] | 503-294-7699

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