updated 4/27/2006 3:14:51 PM ET 2006-04-27T19:14:51

Facing its stiffest competition in years and slowing demand for computers, Intel Corp. is planning a broad restructuring that will focus on every aspect of the chip maker’s operations, Chief Executive Paul Otellini said Thursday.

“No stone will remain unturned or unlooked at,” Otellini said at an analyst conference in New York City. “You will see a leaner, more agile and more efficient Intel Corp.”

Intel shares rose more than 2.5 percent after the announcement.

Over the next 90 days, executives will identify underperforming business groups and cost inefficiencies but will not wait until the end of the review to start implementing changes, Otellini said.

Without saying whether jobs would be cut, Otellini said it would be “simplistic” if the restructuring included only a reduction of Intel’s work force. Santa Clara-based Intel, the world’s biggest chip maker, had about 103,000 employees worldwide at the end of last quarter.

Otellini, who took over as CEO in May 2005, said he expected executives to provide more details about the restructuring in the third quarter.

The restructuring comes as Intel has seriously stumbled in recent months. A host of new products from Advanced Micro Devices Inc. has allowed Intel’s biggest competitor in PC microprocessors to steal away market share.

Between the end of 2004 and the end of 2005, Intel lost 5.3 percentage points of share to AMD, according to Mercury Research.

Last week, Intel reported a 38 percent drop in first-quarter profit as sales growth for personal computers slowed, causing inventory buildups among PC makers. Intel also announced it would cut about $1 billion in spending during the remainder of 2006 and vowed to undertake a comprehensive review of its operations.

Otellini said he is confident Intel will regain market share in the second half of the year, once the company starts shipping chips based on a new blueprint. Dubbed the “Core” microarchitecture, the design will deliver as much as 40 percent better performance while consuming 40 percent less power compared with Intel’s current top-of-the-line offerings.

Core chips will start shipping in June when Intel introduces a processor code-named “Woodcrest,” for server computers. A month later, Intel will start selling its “Conroe” processor for desktops. A Core chip for notebooks will follow in August.

Building on the success of Intel’s Centrino, a bundle of chips and software for mobile computers, Intel earlier this year introduced Viiv, a chip package designed for media PCs. Earlier this week Otellini unveiled a new bundle called vPro, which initially will be aimed at business desktops, but eventually will include mobile machines as well. VPro is slated for release in the third quarter.

Otellini predicted Viiv and vPro will each generate more than $1 billion each in their first 12 months on the market.

Intel also has recently struggled with shortages of chipsets, which connect a processor to other components inside a personal computer. That led PC makers to look elsewhere for chipsets and microprocessors.

Last week, the company said it also failed to realize that PC growth started slowing in the third quarter of last year. Intel, which had expected growth in the range of 10 percent to 12 percent, now sees the rate “in the high single digits,” Otellini said.

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