Intel slashes 10% of global jobs

The high-tech chip industry is one of the most competitive

Intel, the world's largest computer chip-maker, is to cut 10,500 jobs - or 10% of its total staff, by mid 2007.

The move follows a fall in Intel's quarterly profits of 56% and the launching of an efficiency review.

Intel's earnings have been suffering after the firm cut chip prices to fend off increased competition from rival Advanced Micro Devices (AMD).

The cuts, focusing on marketing, management and IT employees, are tipped to save the firm $3bn (£1.6bn) by 2008.

Meanwhile, the severance packages are expected to cost the firm about $200m.

Intel, whose business includes PC processors, memory chips, currently has a 100,000-strong workforce.

Competition

The reduction, which analysts had been expecting, includes 1,000 managers that the firm laid off in July as well as workers in two units that were sold off recently.

The company's position at the top of the industry has come under scrutiny as AMD attempts to close the gap between the two firms.

As well as offering lower-cost products, AMD also has been expanding through acquisition - most recently by buying ATI Technologies for which it paid $5.4bn (£2.8bn) in July.

In the face of this new threat, Intel is carrying out its largest restructuring in decades.

Earlier this year, the company got rid of 1,000 managers and sold non-core businesses including Xscale and a telecommunications division.

In addition, the firm is planning to refine its manufacturing methods and reduce the time it assesses the basic design of its chip from every four years to every two years.

Analysts were keen not to overplay the problems facing Intel, however, and said that the firm's earnings were still in good shape.

In its most recent earnings report, Intel said that net profit was $885m in the three months to 1 July, compared with $2bn a year earlier.

And while it trimmed sales forecasts for the three months running to the end of September, revenues were seen coming in at between $8.3bn and $8.8bn.

Shares in the firm closed 0.8% lower at $19.81.