Intel Restructures SMG, Targets 35% Cost Reduction

Intel's Sales and Marketing Group (SMG) will undergo a restructuring with the goal of decreasing expenses by more than 35 per cent by the end of the year as per an internal presentation slide obtained by CRN. This decision is part of a larger strategy to line with the semiconductor giant's recent order to eliminate more than 15,000 positions and reduce total spending by more than USD 10 billion.

On 5 August, Intel's Chief Commercial Officer and SMG leader, Christoph Schell, declared the extreme cost-cutting aim during an all-hands meeting with the sales and marketing teams. Schell emphasised the importance of simplifying SMG's operations, focusing on efficiency and streamlining programs to generate major cost reductions. The reorganisation hopes to save USD 100 million in expenditures in the second half of 2024 and another USD 300 million in the first half of 2025.

This cost-cutting initiative is in reaction to worsening financial conditions, according to Intel CEO Pat Gelsinger. In a public message to staff on 1 August, Gelsinger acknowledged the company's problem with high expenses and low profitability, despite the growing relevance of AI. Intel is facing increased competition from AMD, Qualcomm and AI chip giants such as Nvidia. The PC business is also becoming more competitive, with AMD gaining CPU market share and Qualcomm renewing its push into the sector.

Schell's approach includes decreasing manpower and eliminating overlapping jobs within SMG, as well as streamlining the group's programs from start to finish. The emphasis will shift towards increasing efficiency in account coverage, marketing, communications and events. The organisation will also reconsider contra-revenue spending, which includes market development and co-marketing expenses that are critical to Intel's collaborations. 

Even with the proposed layoffs, Intel's commitment to its channel partners remains a top priority. SMG's efforts will focus on defending important business areas like as billing and decentralised coverage, which are critical for maintaining solid relationships with channel partners. The company intends to improve its channel strategy to guarantee that partners continue to receive value and assistance.

The impact of these cuts on Intel's channel partners is still being assessed. Partners such as Wallace Santos, CEO of Maingear, are waiting for more information on how these changes would impact their cooperation with Intel. The company has already begun giving voluntary buyouts to its employees, with a decision deadline of 23 August. 

Intel's most recent restructuring initiatives inside SMG are part of a larger strategy to handle financial issues and respond to changing market conditions. While these adjustments are intended to streamline operations and cut costs, the firm is committed to preserving its channel connections and keeping a competitive edge in the semiconductor market.