Intel plan for layoffs may jolt Folsom

Intel Corp. announced major restructuring and layoff plans Tuesday that could hit the chip giant's 7,000 Folsom workers particularly hard.

In a news release, Intel said it will cut 10,500 of about 100,000 workers worldwide by the middle of next year, hoping to save $2 billion in 2007 and $3 billion in 2008 as it works to fend off rivals to its dominance in the microprocessor industry.

The company said the job cuts, as many as 5,000 of which are scheduled this year, will be spread among management, marketing and information technology workers. Because Folsom is headquarters for Intel's IT department, employing up to 1,800 workers to manage the company's internal computer networks worldwide, the cuts could be especially painful in the Sacramento region.

Folsom also has a large contingent of marketing personnel.

Teri Munger, an Intel spokeswoman in Folsom, said Tuesday's announcement -- made to staff via a Webcast by Chief Executive Paul Otellini -- was a broad outline that offered no specifics.

"People are still in a wait-and-see mode," Munger said. "We understand the grand plan but don't know the individual aspects. We will probably know more during the next month."

Before being laid off, most affected workers would go into a "redeployment pool" from which they could look for other jobs within the company, Munger said. But she acknowledged that with Intel's work force shrinking, available jobs would be scarce.

That was motivation enough for Peter Finn, an IT worker who left the company last month after being told his position was marked for elimination.

Finn stays in touch with former colleagues.

"The mood is gloom and doom out there right now. I'm helping people with their résumés," said Finn, who has launched his own IT consulting business.

"The consensus is that they expect to be gone by the end of the year, if not sooner," he said.

Intel workers interviewed at the Iron Point light-rail station in Folsom expressed optimism that they would escape the brunt of the cuts.

"I'm in chipsets, so we're safe now," said Nirav Galla, a 25-year-old design engineer. "Chipsets and processors, they aren't (making any cuts) in that."

The restructuring puts on hold a final decision on whether to build a $100 million office building on the Folsom campus to alleviate overcrowding. If enough people are laid off, Munger said, Intel won't need the additional space.

If hundreds of well-paid Intel employees find themselves without jobs over the next several months, it could be a blow to an already shaky real estate market, but the area's economy should be able to absorb the shock, experts said.

"We've seen things like this happen before, and we will probably be able to ride it out," said David Lyons, a labor market analyst with the California Employment Development Department.

He said people with the skills needed to work at Intel generally are in demand in the region. "All these people are highly skilled and will be very marketable," Lyons said.

Though it was painful for the individuals involved, the economy absorbed at least 2,500 job losses at Hewlett-Packard Co. in Roseville over the past several years, said Barbara Hayes, executive director of the Sacramento Area Commerce and Trade Organization.

"Anytime there are layoffs, it's a major blow," Hayes said. "But 10 or 15 years ago this would have had a much more significant impact. … (Now) we have the diversity and strength in our base economy to withstand something like this."

The home market, already reeling from a glut of sellers and a shortage of buyers, could be hit hard if a significant number of Intel workers put their homes on the market, said Fred Wilcox, a real estate agent with Remax Gold in Folsom.

"Right now the market is pretty loaded with listings," Wilcox said. If motivated sellers unload another passel of homes on the market, it will drive down prices, he said.

Intel's restructuring comes as the company works to streamline operations in the wake of disappointing financial results and stiff competition from rivals like Advanced Micro Devices Inc.

Intel already has sold off several business units and laid off more than 1,000 managers companywide. According to documents filed with the Employment Development Department, Intel laid off 53 Folsom workers on July 5 and 77 on July 28.

Wall Street reacted coolly to Intel's plans, which were announced after the close of the stock market. In after-hours trading, Intel shares fell 26 cents to $19.73 after gaining 11 cents during regular trading on the Nasdaq National Market.

Nathan Brookwood, an analyst with Insight 64 in Saratoga, said he was surprised that Intel would not cut major programs along with its work force.

"My view was that the company needed to cut out some programs as well as people," Brookwood said.

"What they seem to be saying is that … 90 percent of the workers are going to have to do the work that 100 percent did before."

About the writer:

• The Bee's Clint Swett can be reached at (916) 321-1976 or cswett@sacbee.com. Staff writer Jim Downing contributed to this report.