Intel bucks downsizing trend with new investment

Most major technology companies are venturing down the path of major cost-cutting initiatives in response to the worldwide economic slowdown. However, Intel Corp. is coupling cutbacks with new spending.

Intel announced Jan. 21 that it would be closing two assembly test facilities in Penang, Malaysia, and one in Cavite, the Philippines, and halting production at an older fabrication facility in Hillsboro, Ore. But a Feb. 10 announcement detailed plans to pump $7 billion into updated manufacturing facilities geared toward newer chip technology – all in the U.S.

“Seventy-five percent of Intel products today are sold outside the United States,´ said company spokesman Bill MacKenzie. “At the same time, we still build 75 percent of our products in U.S. factories, and 70 percent of the dollars we devote to research and development and capital investment are spent right here in America.”

The $7 billion investment will be for facilities in New Mexico, Arizona and Oregon that will produce 32-nanometer chips and will not directly impact Intel’s Colorado operations. Intel is actually winding down its manufacturing operations in Colorado Springs. Its fabrication facility there is up for sale and “the workforce there is also winding down,” according to MacKenzie.

In Fort Collins, where Intel houses its Itanium design center, employment has been steadily increasing, and is now at 420 employees, up from 400 last year. The company did cut costs by eliminating its budget for promotions and merit pay.

At the same time, other Northern Colorado technology manufacturers have been cutting positions and cutting other costs. Agilent Technologies announced its plans to eliminate another 600 positions worldwide, in addition to 500 already planned. The additional cuts are related to closing inspection businesses in its semiconductor and board test segment and restructuring its global infrastructure organization. Agilent spokeswoman Jean Mooney said that the global infrastructure cuts were still being worked out and that the impact in Colorado of the closure of board test businesses would be minimal. The previously announced cuts included about 25 Colorado workers.

Employee numbers veiled

Agilent has a history of being open about its employment numbers – many in the industry feel that when the firm spun off from HP it took the company culture of the “HP Way” with it. Other technology employers have been less open about the local impact of worldwide workforce cuts.

HP, for example, stopped telling local media what its employment counts were around the time of the tech bust, and not much has changed. In December, the company announced it had reached the end of a three-year initiative to consolidate 85 datacenters around the world into six – two each in Atlanta, Houston and Austin, Texas. The program, which completely restructured the company’s internal IT operations, cut IT operating costs in half.

However, a company spokeswoman would not divulge how many employees nor what sites were affected. She referred all questions to the releases announcing the start and final phase of the initiative.

On the positive side, HP is joining the ranks of tech companies looking to avoid mass layoffs. After reporting a 5 percent decline in profit for its fiscal first quarter, the company revealed its plan for pay cuts.

CEO Mark Hurd will take a 20 percent pay cut, other executives will take a cut of 10 percent to 15 percent, and most other employees will take a 5 percent pay cut. The move is aimed at avoiding layoffs – a tactic Agilent employed at the start of the year.

Avago, which spun off from Agilent, is being similarly tight-lipped. In early January, the company announced it would reduce its worldwide workforce by 230 positions, or 6 percent. Avago spokesman Alain Dangerfield said the company was not revealing specifics of the cuts at this time.

Avago may have a bit of an excuse to being so quiet lately. The firm last summer filed the initial documents for an initial public offering. Dangerfield also could not comment on where the company is in that process for regulatory reasons.

Attempts to contact Advanced Micro Devices Inc., LSI Corp. and Broadcom Corp. about cost-cutting and restructuring measures have been unfruitful since mid-December.

Kristen Tatti covers technology for the Northern Colorado Business Report. She can be reached at 970-221-5400, ext. 219 or ktatti@ncbr.com.

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