Intel cutting 12,000 jobs from PC and mobile to refocus on IoT and the cloud

US chip giant Intel has announced it will be cutting 11% of its workforce – 12,000 employees – over the next year to enable a shift away from client computing and towards IoT and the cloud.

The announcement coincided with Intel’s Q1 earnings announcement, which revealed a slight year-on-year increase in revenue but a slight decrease in operating income. Ironically the Client Computing Group, which includes PCs and mobile devices, was up on both counts, but Intel has chosen to act before things get unpleasant.

“Our results over the last year demonstrate a strategy that is working and a solid foundation for growth,” said Intel CEO Brian Krzanich. “The opportunity now is to accelerate this momentum and build on our strengths. These actions drive long-term change to further establish Intel as the leader for the smart, connected world. I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.”

In the subsequent analyst call Krzanich said “…we’re moving from a client-centric (Intel’s been typically known as the PC company) to a company that is focused more and more on a much broader set of products and really focused around the cloud, and the cloud and all the connected devices that connect to that cloud and the connectivity that brings those devices to the cloud.

“40% of our revenue, 60% of our margin comes from areas other than the PC right now. It’s time to make this transition and push the company over all the way to that strategy and that strategic direction. So that’s why we wanted to do it now.”

When asked for specifics about the cuts Krzanich was keen to stress it’s not necessarily about the client group as a whole. He identified ‘2-in-1s’, gaming PCs and set top boxes as growth areas within the client group but said nothing about mobile. In response to the follow-up question querying mobile specifically all he could say is that Intel is continuing to increase the mobile group’s profitability, which in this case is corporate-speak for reducing its considerable losses.

Intel has been trying to crack mobile for years but has never been able to overcome the fundamental architectural advantages ARM-based chips such as Qualcomm’s Snapdragon and Apple’s SoCs have over the relatively power-inefficient Intel ones. Mobile was incorporated into client computing to make its consistent failure less conspicuous and this restructuring seems to signify Intel is throwing in the towel on smartphones at least.

Earlier this month it was widelyreported that a senior member of its mobile team, Aicha Evans, was moving on, although this has not been confirmed by Intel. The departure of Intel lifer Kirk Skaugen, who was the boss of the entire Client Computing Group, was confirmed, however, and it would be easy to assume that was in anticipation of today’s announcement.

While the PC industry has been in slow decline for decades, Intel still makes decent money from that group in spite of its mobile failures. But the writing’s on the wall and making a bold statement in the direction of IoT and the cloud seems sensible at this stage. Intel’s shares a down a couple of percent at time of writing, implying the market is not violently opposed to this strategy.