Published - October 12, 2022 @ 4:26 PM (EET)
According to a Bloomberg News report Tuesday, Intel Corp. (NASDAQ:INTC) is looking to make significant job cuts in the coming period, citing people with knowledge on the matter.
In the face of a gloomy economic downturn and a slowdown in demand for PC processors, Intel may announce thousands of jobs cuts around the time it's scheduled to release its third-quarter earnings release on October 27.
WHAT HAPPENED
Following weaker-than-expected earnings in its second quarter, Intel, on July 29, slashed its full-year sales forecast between $65 billion and $68 billion. In addition, in recent months, analysts highlighted that Intel continues to lose market share to Advanced Micro Devices (NASDAQ:AMD).
As a result, analysts expect revenue to decline nearly 20% in the third quarter.
Elsewhere, with PC prices stagnating and demand weakening, Intel also may have to pursue a dividend cut to offset cash-flow headwinds, said Bloomberg Intelligence analyst Mandeep Singh.
WHY IT MATTERS
Tech stocks have had a brutal year so far, with shares in Intel down 53% in 2022, marking deep bear market territory.
The potential job cuts are particularly worrying due to the company's timing since it comes just as the tech sector heads into the crucial holiday period. But with rising inflation and nervousness around a possible recession, consumers may be holding off on luxury purchases.
Moreover, Intel lobbied heavily for a $52 billion chip-stimulus bill this year, vowing to expand its manufacturing in the US and build two giant chip-making factories in Ohio and Arizona, along with investments from rival firms.
Intel added 1% in premarket trading Wednesday, indicating an opening bell price of $25.24.
NOW WHAT
Since last year, when the semiconductor business was already starting to experience headwinds, CEO Pat Gelsinger has been shifting its efforts to restructure Intel's chip designing and chip-making operations to bring Intel back to its leadership position.
However, analysts are cautious about Intel's stock.
Based on 27 ratings tracked by TipRanks, the stock has a Hold consensus (4 Buys, 15 Holds, 8 Sells), while the average price target of $36.38 implies an upside potential of 45.29% from current levels.
