In an effort to bounce back from slumping sales in the first quarter of 2006, Intel Corp. told 17 employees at its Glasgow, Scotland, site earlier this week that it would shut down the site by September.
Intel spokeswoman Barbara Grimes on Friday described those let go as "a small group that develops Ethernet MACs." A media access control (MAC) layer is a protocol that controls data flow through the physical medium of a local area network (LAN).
Intel leaders had initially tried to transfer the group to another division of the company, but finally decided to lay them off, she said.
"We looked at lots of different options, but couldn't find another home for that group at Intel. It was a difficult decision but we have to focus on what's best for the company," Grimes said.
Intel made the change so it could sharpen its focus on building components for embedded and communications devices. Intel's communications infrastructure group sells those parts to manufacturers who make devices for storage, medical, print imaging, wireless, security, IPTV (Internet Protocol TV) and voice.
The move comes two weeks after Intel Chief Executive Officer Paul Otellini promised financial analysts he would cut spending by US$1 billion and "restructure, repurpose and resize" the 100,000-person company in a series of changes over the next 90 days.
Those changes will help Intel recover from a predicted drop in profits from $12.1 billion in 2005 to $9.3 billion in 2006, Otellini told analysts on April 27.
Despite the timing, the Glasgow shutdown is not part of that effort, said Grimes. Intel had been planning this move long before Otellini's pledge.
Still, this is the third move Intel has made in recent weeks to streamline the company in an attempt to recover revenue and win back market share from competitor Advanced Micro Devices Inc. (AMD)
In April, Intel told an undisclosed number of workers at its optical platforms division in Newark, California, that it planned to transfer their jobs to contract manufacturers by the end of 2006. Those workers have been making optical and transponder products for the company since Intel acquired LightLogic Inc. in 2001.
And on May 5, Intel announced it would combine its NAND and NOR flash memory groups into a single division, combining fabrication plants and technology development with marketing and product development, said Allen Homes, manager of the NOR flash group at Intel.
The combined group will create vertical integration between offices spread across Israel, Ireland, the Philippines and Santa Clara, California, he said. The change will have no effect on Intel's November 2005 decision to manufacture its NAND products through IM Flash Technologies LLC, a joint venture with Micron Technology Inc.
Intel is moving in the right direction, but these steps are just window dressing compared to the complete reorganization the company needs to become competitive again, analysts say.
"This is a start; it shows they are doing something. But they have to do so much more," said Rob Enderle, principal analyst with The Enderle Group.
"AMD's just chewing them up," he said. "To respond to that kind of threat, they need much more than just shutting down a couple of plant sites."