Intel will have 10,500 fewer employees, after a strategic review designed to prepare the company for the future (when it will have a smaller share of the chip market). This comes after the Intel Bangalore branch affair and after the company announced that its two primary marketing and sales executives, Eric Kim and Anand Chandrasekher, were being assigned to other positions within the company (Sean Maloney was named the sole head of the sales and marketing group at that time).

The most affected will be the marketing and information technology departments. The plan is to save $2 billion in annual costs. That number includes several layoffs and divestitures already announced by the company, including the pending departure of 1,000 managers, and the sale of its communications unit to Marvell. Intel also sold some telecommunications assets to Eicon. About 2,000 employees were involved in those transactions. Intel has already shed 5,000 positions, said company spokesman Chuck Mulloy. He also said that "the remaining 5,500 cuts will bring Intel's headcount down to 92,000 by the second quarter of 2007, and cost Intel $200 million in severance pay." By 2008, Intel hopes the annual cost savings will reach $3 billion.

Intel CEO Paul Otellini showed in a press release announcing the move that "these actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come." The rival, AMD, now owns 26 percent of the server market, compared to virtually nothing before its Opteron processor arrived in 2003, and it thinks it can reach 40 percent of that market by the end of the decade.

"Intel wants to increase the ratio of marketing employees who work directly with its customers, as opposed to internal employees", said Mulloy. The company will also look to improve the efficiency of its manufacturing operation. By next year, Intel will start looking to other areas, including human resources and other departments, as it works its way down to 92,000 employees. Intel's financial performance this year has disappointed investors. The company's profits have fallen as it has tried to shore up its market share with price cuts.

Intel is pinning its hopes on a new generation of products based on a more energy-efficient blueprint that appears to outperform AMD's chips in several categories.