Business briefs
By NewsPress Now
Intel to cut roughly 15,000 jobs
Chipmaker Intel Corp. is cutting 15% of its massive workforce — about 15,000 jobs — as it tries to turn its business around to compete with more successful rivals like Nvidia and AMD.
In a memo to staff, Intel CEO Pat Gelsinger said Thursday the company plans to save $10 billion in 2025. “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” he wrote in the memo published to Intel’s website. “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low.”
The job cuts come in the heels of a disappointing quarter and forecast for the iconic chip maker founded in 1968 at the start of the PC revolution.
Next week, Gelsinger wrote, Intel will announce an “enhanced retirement offering” for eligible employees and offer an application program for voluntary departures. Intel had 124,800 employees as of the end of 2023 according to a regulatory filing.
“These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career,” he said. The bulk of the layoffs are expected to be completed this year.
The Santa Clara, California-based company is also suspending its stock dividend as part of a broader plan to cut costs.
Intel reported a loss for its second quarter along with a small revenue decline, and it forecast third-quarter revenues below Wall Street’s expectations.
The company posted a loss of $1.6 billion, or 38 cents per share, in the April-June period. That’s down from a profit of $1.5 billion, or 35 cents per share, a year earlier. Adjusted earnings excluding special items were 2 cents per share.
Revenue slid 1% to $12.8 billion from $12.9 billion.
Analysts, on average, were expecting earnings of 10 cents per share on revenue of $12.9 billion, according to a poll by FactSet.
“Intel’s announcement of a significant cost-cutting plan including layoffs may bolster its near-term financials, but this move alone is insufficient to redefine its position in the evolving chip market,” said eMarketer analyst Jacob Bourne. “The company faces a critical juncture as it leverages U.S. investment in domestic manufacturing and the surging global demand for AI chips to establish itself in chip fabrication.”
Helped by Gelsinger’s lobbying efforts, Intel has been a major beneficiary of the 2022 CHIPS and Science Act, which the Biden administration helped shepherd through Congress at a time of concerns after the pandemic that the loss of access to chips made in Asia could plunge the U.S. economy into recession.
In March, President Joe Biden celebrated an agreement to provide Intel with up to $8.5 billion in direct funding and $11 billion in loans for computer chip plants around the country, talking up the investment in the political battleground state of Arizona and calling it a way of “bringing the future back to America.” At the time, Gelsinger called the CHIPS Act “the most critical industrial policy legislation since World War II.”
In September 2022, Biden praised Intel as a job creator with its plans to open a new plant near Columbus, Ohio. The president praised them for plans to “build a workforce of the future” for the $20 billion project, which he said would generate 7,000 construction jobs and 3,000 full-time jobs set to pay an average of $135,000 a year.
Shares plunged more than 20% to $23.82 in after-hours trading, indicating that Intel could lose roughly $24 billion of its market value when the stock market opens Friday.
Bank of England lowers its main interest rate by 0.25%
LONDON | The Bank of England has cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020 as inflationary pressures in the economy have eased.
In a statement Thursday, the bank said that by a 5-4 margin, its policymaking panel backed a quarter-point reduction in its main interest rate to 5%, from the 16-year high of 5.25%.
It’s the latest central bank to cut interest rates following a long stretch of increases. The U.S. Federal Reserve has yet to take the step but many think it will be ready to next month.
Many economists thought that the Bank of England, which is independent of government, would join the Fed in keeping rates on hold once again given persistent price pressures in the services sector, which accounts for around 80% of the British economy.
Though those concerns remain, certainly among the four opting to keep borrowing rates on hold, the majority on the panel think the hard medicine of higher borrowing costs has worked, with inflation in the U.K overall down at the bank’s target of 2%.
“Inflationary pressures have eased enough that we’ve been able to cut interest rates today,” said Bank Gov. Andrew Bailey, who voted for a cut. “But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”
Bailey’s comment suggests that interest rates will not be falling dramatically over coming months, certainly nowhere near the pace that the bank had hiked them in recent years.
Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up during the pandemic and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs.
Though no one is anticipating rates to fall to those previous lows, there are widespread expectations that the bank will cut again in coming months, especially as its forecasts suggest inflation will be below target in the next couple of years, despite a modest increase in the second half of the year.
“But ultimately it is the data that will determine how interest rates evolve from here, with the bank hoping its conviction that underlying inflation pressures are fading will be vindicated,” said Luke Bartholomew, deputy chief economist at abrdn, formerly known as Aberdeen Asset Management.
The cut — and the potential of future cuts — are welcome news to millions of mortgage holders, certainly those whose borrowing costs track the bank’s headline rate, though it will likely mean that the savings rates offered by banks will be reduced.
David Hollingworth, associate director at L&C Mortgages, said the prospect of further rate cuts will help boost consumer confidence and that could help the housing market.
“That will be important reassurance to many that have been scarred by the turbulent and volatile periods in the mortgage market over the last couple of years,” he said.
Higher interest rates — which cool the economy by making it more expensive to borrow — have helped ease inflation, but they’ve weighed on the British economy, which has barely grown since the pandemic rebound.
Critics of the Bank of England say it has being overly cautious about inflation in recent months and that it had maintained high interest rates for too long, unnecessarily harming the economy. Borrowing costs had been held at 5.25% since August last year, even though inflation was clearly on a downtrend while the economy stagnated.
It is a charge that’s also been leveled against the U.S. Federal Reserve, which kept rates unchanged on Wednesday. It is widely anticipated that the Fed will
Other central banks, including the European Central Bank, have opted to cut rates but are doing so cautiously.
CBS names Dickerson, DuBois as co-anchors of the ‘CBS Evening News’
John Dickerson and Maurice DuBois will co-anchor the “CBS Evening News” following the departure of Norah O’Donnell later this year, the network said Thursday.
Dickerson is a former host of “Face the Nation” and “CBS This Morning” for the network. The former Time magazine White House correspondent has been anchoring a nightly newscast for CBS’ streaming service most recently.
DuBois, a veteran anchor for CBS’ local affiliate in New York City, has also contributed reporting to various CBS newscasts.
The storied newscast, which Walter Cronkite, Dan Rather and Katie Couric have anchored, has been third in the ratings to ABC’s “World News Tonight” and NBC’s “Nightly News” for years. O’Donnell, who is becoming a special correspondent focusing on big interviews for CBS, didn’t move the needle.
Bill Owens, executive producer of CBS News’ most successful broadcast, “60 Minutes,” will also become supervisor of the evening news, said Wendy McMahon, president and CEO of CBS News and Stations. Owens appointed veteran “60 Minutes” hand Guy Campanile as executive producer of the evening news.
The Washington-based Margaret Brennan, moderator of “Face the Nation,” will lead the broadcast’s coverage of political and foreign affairs. The evening news, which broadcast from a Washington studio to accommodate O’Donnell, will move back to New York, CBS said.
The newscast also named Lonnie Quinn as its chief weather forecaster.
Average rate on a 30-year mortgage falls to 6.73%
LOS ANGELES | The average rate on a 30-year mortgage fell this week to its lowest level since early February, easing borrowing costs for prospective homebuyers facing record-high home prices.
The rate fell to 6.73% from 6.78% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.9%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 5.99% from 6.07% last week. A year ago, it averaged 6.25%, Freddie Mac said.
After jumping to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has mostly hovered around 7% this year — more than double what it was just three years ago.
The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, extending the nation’s housing slump into its third year. Sales of previously occupied U.S. homes fell in June for the fourth month in a row. And sales of new single-family homes fell last month to the slowest annual pace since November.
Still, the average rate on a 30-year mortgage hasn’t gone above 7% since late May, reflecting recent signs of cooling inflation, which have raised expectations that the Federal Reserve will cut its benchmark rate in September.
Mortgage rates are influenced by several factors, including how the bond market reacts to the central bank’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
Hopes of a Fed rate cut this fall amid signs the economy’s growth is slowing have helped lower the yield on the 10-year Treasury note in recent weeks. The yield, which topped 4.7% in late April, was at 3.98% in midday trading in the bond market — the lowest it’s been since February.
If bond yields continue to decline in anticipation of the Fed lowering rates this fall, that could lead mortgage rates to ease further.
“Expectations of a Fed rate cut coupled with signs of cooling inflation bode well for the market, but apprehension in consumer confidence may prevent an immediate uptick as affordability challenges remain top of mind,” said Sam Khater, Freddie Mac’s chief economist. “Despite this, a recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential homebuyers.”
Even so, most economists expect the average rate on a 30-year home loan to remain above 6% this year. That may not be enough of a decline to entice home shoppers who have been holding out for mortgage rates to come down, nor persuade homeowners who locked in rock-bottom rates three years ago that it’s a good time to sell.
Consider, some 86% of all outstanding home mortgages have an interest rate below 6%, and more than three quarters have a rate 5% or lower, according to Realtor.com.
“While the potential rate cut in September will be a good start to bring the rate down, subsequent drops in mortgage rates may not be as significant as many anticipated because the market is already pricing in rate cuts and such expectation is reflected by recent rate drops,” said Jiayi Xu, an economist at Realtor.com.
—From AP reports
