Intel trimming costs

February 20, 2001: 3:38 p.m. ET

Chipmaker defers salary increases, hiring in cost-cutting effort

NEW YORK (CNNfn) - Faced with a sudden and substantial decrease in demand for its products, Intel Tuesday implemented a range of cost-cutting measures.

The measures, outlined in an e-mail to employees, are aimed at cutting "hundreds of millions of dollars" in expenses, Tom Beermann, an Intel spokesman, told CNNfn.com.

However, Beermann would not say specifically how much the company expects to save. He also stressed that Intel's financial guidance for the current quarter is unchanged.

Under the cost-cutting plan, Intel will defer pay increases for senior-level employees until October. Other salaried employees will receive half their pay increases now, and the remaining half in October.

The company normally awards performance-related raises in April, Beermann said.

In addition, Intel will trim the total number of employees on its payroll through attrition, limiting its hiring to "critical technology and engineering positions only," Beermann said, adding that no employees will be laid off.

The company also is aiming for a 30 percent decrease in discretionary spending on items such as travel and will postpone delivery of free personal computers for its salaried employees.

Intel has not reduced its capital spending or its research and development budgets, Beermann said.

In January, Intel posted a fourth-quarter operating profit that narrowly beat Wall Street's expectations, with greater-than-expected gains on its investments accounting for the upside surprise.

At that time, Intel executives substantially lowered their first-quarter financial targets, citing the economic slowdown and subsequent inventory glut that have stung most company's in the semiconductor and computer hardware segments.

But at the same time, they announced plans to step up capital spending in 2001 to $7.5 billion from $6.5 billion in 2000. Research and development spending in 2001 will be roughly $4.3 billion, compared with $3.9 billion in 2000, Intel executives said.

Intel (INTC: Research, Estimates) shares were down $2.31 at $32.06 in afternoon Nasdaq trade. The broader semiconductor segment also was under pressure, driving the Philadelphia Stock Exchange's semiconductor index down 40.97 points to 620.42, a 6.2 percent decline.