Intel is cutting the pay of its managers and senior executives, in an unusual cash-saving move by the chipmaker to weather an expected downturn in the first half of this year.
Cuts to base pay start at 5 per cent for mid-level workers and rise to 25 per cent for chief executive Pat Gelsinger, according to one person familiar with the details. The executive leadership team around Gelsinger will take a 15 per cent pay cut, while other senior managers will see a 10 per cent reduction.
However, the cuts only affect base salaries and some other minor benefits. They will not impact the bonuses and stocks that make up a significant part of top executives’ overall package.
Last year, Intel said Gelsinger’s targeted remuneration for 2022 was $26.3mn, with only $1.25mn of that representing the base pay that is subject to the pay cut. The rest is set to come in the form of an expected cash bonus and long-term incentive equity award.
News of the reductions comes a week after Intel surprised Wall Street with a warning that its revenue this quarter was likely to be 40 per cent below the same period the year before. It blamed the collapse in sales on a sudden exacerbation of an inventory correction that has hit the chip industry since last summer. Some analysts said the decline also appeared to reflect a further loss of market share.
Intel pointed to its efforts to “navigate macroeconomic headwinds and work to reduce costs across the company”, saying on Tuesday that the cuts would “help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy”.
The company was already facing a cash squeeze before the latest step down in sales. It is trying to maintain a heavy programme of investment in the face of a tumbling PC market, while also protecting its dividend payment to shareholders.
Unlike many tech companies, Intel has not announced company-wide job cuts as tech markets weaken. Instead, cost-cutting decisions have been left to individual business units as it seeks to meet a goal of slicing $3bn out of its annual operating budget by the end of this year.
News of localised job cuts started to emerge in recent weeks, with official filings in California revealing plans to reduce the workforce by more than 500 at two of its facilities in the state.
Intel added 10,800 workers last year, boosting the size of its workforce by 9 per cent, even as its revenue tumbled by 16 per cent and it reported negative adjusted free cash flow for the year of $4bn.
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