Intel Corp., the largest chipmaker in the world, announced Tuesday that 12,000 of its employees worldwide will lose their jobs by 2017.

Intel employs more than 105,000 employees and shrinking its workforce by 11 percent would mean potential savings of $750 million for 2016 and $1.4 billion by the middle of 2017 after the job cuts are completed, the company said.

Chief Executive Brian Krzanich described the decision by Intel to cut jobs as difficult but necessary if the company wants to save up money to invest in businesses of high growth.

"These are not changes I take lightly. We are saying goodbye to colleagues who have played an important role in Intel's success," Krzanich wrote in his email announcement to employees.

Intel said the employees affected by the job cut will be notified in the next 60 days.

Meeting Margins

Analysts' first quarter projections for the Santa Clara, California-based company were estimated to be $13.8 billion in revenue and 37 cents in earnings. Intel's first quarter performance is well within that projection, with revenue climbing by 7.2 percent to $13.7 from the previous quarter and 42 cents in earnings.

Gross margin, the amount remaining after deducting the cost of production from total sales, will remain to be above the 60 percent threshold that the company has maintained since 2014, Intel said.

With the PC market declining more than Intel anticipated, total revenue growth for the company is expected to be lower compared with 2015, according to Intel's CFO Stacy Smith on a conference call Tuesday.

Executive Movements

The company also announced that its chief financial officer Stacy Smith will assume a new role to lead sales, operations and manufacturing. Krzanich defended the move as an opportunity for Smith to get exposure to more parts of the company and let the company see his leadership style.

In April, Intel announced the exit of two veteran division chiefs: Client Computing Group head Kirk Skaugen and Internet of Things general manager Doug Davis. Their departure may have been triggered by Krzanich's hiring of Murthy Renduchintala, a former Qualcomm executive, to a position higher than theirs.

Some analysts are uncertain of the impact of such move.

"I would like the company to talk a little bit about that and hold people's hand on what the strategy is. The old Intel was very dogmatic, but he's ready to pivot in a different direction if that's the way he sees it," said Cowen & Co. analyst Timothy Arcuri.

In a move to veer away from the dwindling PC market, Intel has been focusing on its data center business that is expected to yield higher margins. The company has also started making inroads into the mobile device market even as Qualcomm and Samsung Electronics are putting a fight to maintain their dominance.

The plan of Intel to cut 12,000 jobs would help bolster the company's much needed restructuring and "accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices," Intel said in a statement.

Photo: Jiahui Huang | Flickr

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