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Intel Lays Off 700; Profits Fall to $1.57 Million in '85

January 16, 1986|Associated Press

SANTA CLARA, Calif. — Intel Corp. announced 700 layoffs Wednesday and reported plummeting profits amid signs that the semiconductor industry is rebounding from a long slump.

Intel, one of the nation's largest makers of semiconductor chips, cited depressed conditions in the industry in announcing the layoffs, which are effective immediately.

Those conditions were reflected in the company's 1985 results. Intel reported net income of $1.57 million on revenue of $1.36 billion for fiscal 1985 ended Dec. 28, 1985. That is down from earnings of $198.2 million on revenue of $1.63 billion in fiscal 1984.

Fourth-Quarter Loss

More telling in those results was a fourth-quarter loss in 1985 of $14.9 million and an operating loss of $60.2 million for the year. In the fourth quarter of 1984, the company earned $23.2 million.

The meager net profit recorded in 1985 was the result of interest income and tax benefits.

"They had to pull out all the stops to get that profit," said Michael Kubiak, an analyst with Kidder, Peabody & Co. in San Francisco.

The layoffs, which had been hinted in the fourth quarter, involved 350 workers at the company's Santa Clara headquarters, 145 at two facilities outside of Phoenix and 60 at two facilities outside of Portland, Ore. The rest are scattered across the country.

Those reductions follow 2,300 layoffs in 1984, as well as shortened workweeks for many employees.

"The layoff was a very tough move to take but one that was necessary to reduce our cost structure on a permanent basis," Intel Chairman Gordon E. Moore said. "We must run as leanly and efficiently as possible to remain a leader in the industry over the long term."

With the semiconductor industry apparently starting a slow climb out of a recession, the layoffs were puzzling to some.

"It's kind of confusing in that bookings look like they are improving, albeit gradually," said Mel Phelps, an analyst with Hambrecht & Quist in San Francisco.

The semiconductor industry's book-to-bill ratio, which compares orders to shipments, bottomed out at 0.64 in December, 1984, but rose to 0.98 in December, 1985. But Phelps points out that prices have not rebounded yet and therefore chip makers are still experiencing thin profit margins on their sales.

Layoffs Questioned

Nevertheless, Kubiak remembers that Intel hired 3,000 people in March, 1982, shortly before a downturn in the industry. He wonders whether the new layoffs are necessary if the outlook for semiconductors is improving.

"They have not been really good at calling these turns," he said. "I question their timing."

Intel, one of the best-known companies in the Silicon Valley, is often credited with inventing the microprocessor, the powerful heart of most computers.

In a related development, Fortune Systems of Belmont, Calif., reported that it will reduce its staff by 41 employees--about 12% of its work force of 331--and restructure its senior management team.

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