Intel to cut 4,000 jobs as chip demand falls

The US chip giant Intel last night announced 4,000 job cuts and warned it had still to see any signs of a hoped recovery in its business.

The world's largest semiconductor maker posted second-quarter earnings at the lower end of revised forecasts, and said the staff cuts, almost 5 per cent of its workforce, were due to continuing softness in demand for the PC chips.

"We haven't seen an economic recovery in our business yet," Andy Bryant, Intel's chief financial officer, said. "We want to be cautious in our spending."

Unlike other hi-tech companies over the past year, Intel has escaped massive layoffs. Instead, the company slashed discretionary spending such as travel and delayed raises. Executives said past downturns had shown companies could not cut and save their way through a recession and be prepared for an upturn at the other end.

For the three months ended 29 June, Intel said it earned $446m, or 7 cents a share, compared with profits of $196m, or 3 cents a share, in the same period last year.

Excluding acquisition-related costs, the company earned $620m, or 9 cents a share, compared with earnings of $854m last year. Sales were $6.32bn, slightly lower than the $6.33bn reported a year ago. Analysts were expecting second-quarter profits of 11 cents per share on sales of $6.35bn. Intel said analyst estimates do not include a $106m charge announced last month to close Intel Online Services, its Web hosting service.

Earlier this month, Intel warned that it would not meet its previous sales forecast of $6.4bn to $7bn, lowering the range to between $6.2bn and $6.5bn. At the time, it blamed lower-than-expected sales on soft demand for PC processors in Europe.

Executives also suggested the hoped-for back-to-school increase in PC sales was not materializing as expected. Computer vendors purchase parts well in advance of peak consumer purchasing.

Separately last night the US mobile giant Motorola reported a record $2.3bn net loss for the second quarter after $3.4bn of one-off charges, mostly relating to its chip division. But the fact it had returned to the black before exceptionals prompted investors to push its stock up 4 per cent in after-hours trade.