Intel CEO Takes Pay Cut as Chip Maker Targets Cost Reductions

Intel last year said it would also cut jobs as part of a sweeping effort to reduce costs. The company is targeting $3 billion in cost cuts this year, increasing to as much as $10 billion of annual cost reductions and efficiency gains by the end of 2025, including layoffs. The company last week said it remained on track toward that goal.

America’s largest chip maker by revenue is struggling amid a broad industry downturn, stiff competition and a costly turnaround plan that Mr. Gelsinger put in motion to restore Intel to a position of industry leadership. 

“As we continue to navigate macroeconomic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programs,” the company said Tuesday. “These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy.”

Intel said hourly and junior employees wouldn’t be affected.

The company also said it was trimming matching contributions to 401(k) plans. 

Mr. Gelsinger became one of the S&P 500’s highest-paid CEOs after he joined Intel in February 2021, with total compensation of nearly $179 million for that year. That included a $110 million sign-on package, nearly half of which reflected incentive pay he gave up by taking the job. Intel hasn’t reported the value of his 2022 pay package.

Intel last week reported a loss for the most-recent quarter and said it expected to remain in the red for the three months through March. The company hasn’t suffered sequential quarters of losses in more than three decades.

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Intel has been hit by the sharp downturn in the personal-computer market, with demand cooling from a buying spree early in the pandemic and weighed down by recession fears. Fourth-quarter PC shipments were down 28.5% from a year earlier, research firm

Gartner

said, the biggest retreat since it began tracking the market in the 1990s.

But Intel is also losing market share. Rival Advanced Micro Devices Inc. said Tuesday that its sales advanced in the most recent quarter, as a 42% increase for its data-center business helped offset PC weakness. Intel’s data-center sales were down about one-third from a year earlier, with its PC business slumping even more.

“We believe we are well positioned to grow revenue and gain share in 2023 based on the strength of our competitive positioning,” AMD CEO Lisa Su said in an earnings call about the company’s data-center and embedded systems activities. 

The financial turmoil for Intel comes at a critical time. The company is investing heavily in chip production to regain ground lost to Asian rivals that now lead the industry in making the most advanced chips. Mr. Gelsinger has committed to more than $100 billion in new chip factories in the U.S. The company is leaning on subsidies from the U.S. government and others to help defray the costs of that effort. 

S&P Global on Wednesday cut its credit rating on the company and said, “We believe Intel’s profitability and cash flows will remain strained over the next two years.” The credit rating was lowered to “A” from “A+,” S&P said, adding that “Even under a successful technology transition, we expect profitability to be below historical norms given the increasingly competitive environment and the expansion into the foundry business that will have margins much lower than Intel’s corporate average given its small scale to start.” 

Intel last week said its adjusted free cash flow in the first half of the year will fall short of expectations provided last year. The cash outlook and plans for large capital expenditures prompted some analysts to say Intel’s dividend payment might be at risk. Intel has said it is committed to paying a competitive dividend. 

—Theo Francis contributed to this article.

Write to Robert Wall at [email protected]