They seem to be drawing a new line in terms of the money going forward. According to them from now onwards if a project just is not even close to being able to double Intel's investment; it isn't getting the green light. "Michelle Johnston Holthaus heads up Intel Products." She delivered this news during a high-profile tech conference. The magic number A 50% gross margin hefty gross margin, on the basis of what the industry expects.
Holthaus is pretty frank with her saying this is a rule they probably should have had before. That's all now: no 50% margin; no engineers assigned, no project can move forward. It is a very clear signal that Intel is getting serious on the bottom line.
Now, this doesn't mean every single aspect of Intel's business will suddenly hit that mark overnight. Holthaus explained that it's more of an internal goal that they're going for. Interestingly, Holthaus also mentioned that the future plans are along the lines of their Panther Lake and Nova Lake chips, which are also expected to hit this ambitious profit target.
Within this push for higher profits is most likely Intel's new CEO, Lip-Bu Tan. Apparently, he's "laser-focused" on getting that gross margin back above 50%. To make this happen, Tan isn't just looking at new projects; he's also said to be scrutinizing existing deals with other companies, potentially axing or changing any that aren't pulling their weight financially.
At the same time, Intel's profit margins don't seem to be looking good nowadays. In fact, they have reportedly gone down to some new lows with the company in recent times. Intel typically enjoyed gross margins around 60%, but things started sliding a few years back-dropped below 50% in the mid of 2022 and continued downward.
However, Holthaus expects slight "tug-of-war" within Intel, here, as engineers and executives will be going back and forth between trying to build great products that consumers want, as well as exceeding what the competition's got but making sure that those are profitable. It's really the classic "between rock and hard place," which has to do with, you know, innovation but also has to do with making money.
The new man in charge from Pat Gelsinger, CEO Lip-Bu Tan, has been streamlining Intel since he took charge. Some major changes in leadership have also been made, and, unfortunately, yet again, more layoffs are reportedly looming, possibly including as many now as 20% of the existing workforce. Said reports indicate that the layoffs will be part of a plan meant to knock out many layers of levels in middle management.
Interestingly, Tan has also stated that he would like to convert Intel back to being an "engineering-focused company," emphasizing investment in recruiting and retaining top talent. He believes that some of Intel's brightest and best over the years have slipped away and has a desire to foster a culture of innovation empowerment.
Mass layoffs and a hard and fast rule of a 50 percent profit margin may not, in fact, seem to fit in well with a culture of empowering innovation on the surface. However, Tan seems to have the backing of Intel's investors as he navigates these challenging waters. Balancing act indeed, and the tech world will watch closely to see how Intel manages to chase both a very ambitious innovation as well as a robust financial health.
