Thursday, April 27, 2006

Intel predicts PC market will slow and announces major restructuring

Industry analysts have for a while been pushing for Intel to reinvent itself after recent market share losses to AMD and poor operating performances. They have even questioned whether CEO Otellini should remain. Well, today Intel responded.

They have announced that they expect the PC market to slow this year and only experience single digit growth (which is below most analyst expectations - ooh, I wonder why!). They then stated that their revenues would shrink this year (now I know why they predict such low PC growth numbers...), which is a stellar stuff up for the generally fast growing Silicon Valley icon.

Otellini then stated that Intel would imbark on the most gargantuan review over the next 90 days (too right!) and that the answer was not as simple as just dumping a bunch of their 100,000 employees in the name of cost cutting.

BUT, they do promise a $1bn reduction in costs this year and a $300m cut in capital spending. Which means they will of course shed a bunch of staff after all.

And boy do they need to do something radical for Intel expects sales to fall 3% in 2006 after three years of double-digit growth and at a time when the rest of the industry is performing strongly. Its stock has fallen more than 20% so far this year to become the worst performer on the Dow Jones Industrial Average.

Shame if you're an Intel shareholder - which is most investors on the planet. But, on the plus side Otellini seems serious this time and his job is on the line which is always a great motivator when it comes to doing something radical - and Intel is finally launching their whacky dual core chips in the 2nd half.

So, good luck Intel and boy must AMD be licking their lips - for they have never had a better chance to extend their recent market share gains while Intel attempts the highly distracting corporate reinvention management thingy.

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