Too many managers, warns Otellini memo

Intel may well be one of the most successful companies ever in the IT industry but in recent years it has been guilty of slow and ineffective decision-making, and has struggled to be effective in the market place.

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By  Peter Branton Published  July 23, 2006

|~|comment73body.jpg|~|Intel managers are “slow and ineffective” decision makers, says Otellini.|~|Intel may well be one of the most successful companies ever in the IT industry but in recent years it has been guilty of slow and ineffective decision-making, and has struggled to be effective in the market place. Well, at least that’s the conclusion of its CEO, Paul Otellini, who this month told its 100,000 staff that the firm needs to cut 1,000 middle management jobs to become a leaner, more agile outfit. Otellini delivered this news in an e-mail to all employees entitled ‘An important and difficult step’, a phrase he repeated in the e-mail itself. “It is difficult because the managers who will leave the company are our colleagues and friends, and since we have limited internal job opportunities, redeploying their skills is not an option,” he wrote, continuing to say however that he believed the move was “an essential first step towards making us more competitive.” Since the firm had already announced that it wanted to make US$1billion cost-savings this year (see IT Weekly 29 April - 5 May 2006) the job cuts are not really that much of a surprise. Indeed, Intel’s share price initially dipped when the news was announced, with Wall Street investors looking for a much more substantial round of redundancies. However, Otellini said, the firm was reluctant to make “reactionary” across-the-board cuts, but rather is looking at further “selective reductions” as part of its ongoing internal restructuring. While Otellini, and other Intel executives, have been keen to present these redundancies as part of a move to improve efficiency at Intel, it seems clear that the company expects its struggle for supremacy with archrival AMD is only going to get worse. In the past couple of years, AMD has managed to eat away at Intel’s lead in the server and desktop markets, leading to falling sales and margins for the chip giant. Even Dell, once a rock-solid Intel customer, has now begun using AMD chips, albeit only in its server products — for now. “Competition will intensify across our product lines,” Otellini admitted in the memo. “Pricing will be aggressive,” he went on to add. There have also been a series of costly misfires for Intel, which has suffered from a series of project delays, including scrapping development of some of the processors it has tried to bring to market in the past couple of years. Undoubtedly, some of this can be ascribed to the “too many management layers” Otellini referred to constantly in his e-mail. Still, as Otellini acknowledged, after 25 years on top, being told you need to improve can be hard to take. For Intel, the challenge is to ensure it does emerge as a leaner, more agile company — not just a slightly smaller one. ||**||

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