When companies announce a massive layoff, shareholders rejoice by bidding shares higher.
On August 1, 2024, Intel (INTC) said it would cut 15% of its staff. It issued weak Q3 revenue guidance of nearly $2 billion below analyst estimates. The firm blamed gross margin headwinds related to the ramp of its AI PC product, charges from non-core businesses, and costs from unused capacity.
Intel’s job cuts are necessary to operate more effectively. Its rivals AMD and Nvidia (NVDA) achieve more with fewer workers. Still, Intel needs to cut middle management layers. It must cut leaders in segments that offer no growth. The firm could increase staff in its AI-related divisions, along with its desktop GPU unit.
Intel is also cutting advertising costs by up to 35%. This will lead to slower revenue growth.
Cisco (CSCO) said it would cut 7% of its staff. The firm highlighted its double-digit growth in collaboration and security. However, its network and switching business is only growing in the high single-digit percentage.
Investors could buy consumer networking pure-play Netgear (NTGR) or Ubiquiti (UI) instead. Cisco is still too big a firm. Its Splunk software purchase may not fuel profit growth. Revenue growth by acquisition is not appealing when profits are not expanding.