Intel's Pat Gelsinger tries to calm employee jitters amid salary cuts and EMEA VP exit

The chipmaker's CEO tells employees in a new memo outlining the chipmaker’s plan to restore staff salaries and other compensation programs

clock • 6 min read
Credit: Intel
Image:

Credit: Intel

Intel is vowing to restore the salaries of executives and senior employees this fall after their base pay gets reduced next month as part of the chipmaker‘s cost-cutting efforts. Meanwhile, the head of the company's Europe, Middle East and Africa business has resigned.

In an internal Wednesday memo seen by CRN, Intel CEO Pat Gelsinger told employees that the company will restore the base salary back to 100 per cent for impacted staff in October.

The chipmaker also plans to bring back quarterly profit bonuses in the third quarter, with payouts beginning the same month.

The 401k match program for US employees will return in January 2024, which is when Intel also plans to launch "reimagined" employee recognition programs, the memo added.

An Intel spokesperson confirmed the timeline for restoring staff salaries and compensation programs.

"When we communicated our decision to temporarily reduce employee compensation and suspend other reward programs, we committed to our employees that we would share our timeline for restoring these as soon as we were able. We are delivering on that commitment with our update today that we plan to begin restoring compensation later this year," the spokesperson said in a statement to CRN.

Gelsinger made the announcement after he said Intel received questions from staff about how long the pay cuts would last and why Intel did not cut its dividend when it announced the cuts last month.

"When we communicated the recent compensation and reward changes, two questions consistently rose to the top: When will we restore these programs and reward employees who remain with the company? And why aren't we cutting the dividend?" he wrote in the memo.

In addition to outlining when Intel would restore base pay and other compensation programs, Gelsinger referenced the company's public announcement Wednesday that it would cut its quarterly dividend by nearly 66 per cent to 12.5 cents per share.

The dividend cut is the latest cost-cutting move Intel is making to preserve cash for its ambitious comeback plan while sales and profits are down significantly.

"I know these decisions have been hard, and we remain committed to rewarding employees who stay with the company and help us navigate through this challenging time," Gelsinger said, adding that the company will provide more details about restoring pay in the future.

Intel Partner Discusses Retention Concerns, Hope For Future

Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based Intel distributor, told CRN that it's always possible for employees to leave companies when salaries are reduced.

"Executives or key employees always have the opportunity to move on to find different challenges for themselves personally and professionally. That's always part of this industry. Certainly, when things start happening around your income, that might make you think about looking elsewhere," he said.

However, Tibbils added, he suspects any employees who end up leaving in the next several months may have been thinking about a job change before the pay cuts happened.

"I don't think this is the kind of thing where they make that kind of decision really quickly," he said.

Even then, Tibbils said, he believes employees have good reasons to stay at Intel through this turbulence as he thinks the company has already made some progress in its comeback plan. He pointed to the momentum with the company's 12th- and 13th-generation Core processors as evidence.

"They've turned the corner. We've seen what they've been able to do on the client side. It's been a slower transition on the server side, but I like the road map and our customers are excited about it," he said.

Intel Encourages Frugal Mindset With 2023 Annual Bonus

The base pay cuts announced last month will impact Intel's top paid employees when it goes into effect in March. Gelsinger is set to take a 25 per cent cut to his base pay while other members of Intel's executive leadership team will take a 15 per cent salary reduction. Executives below that level will receive a 10 percent cut to their base pay. Employees at pay grade levels 7-11 will take a five per cent cut.

In the Wednesday memo, Gelsinger said Intel's board of directors decided to temporarily reduce its base cash compensation by 25 per cent, in line with the cut to his own salary.

The pay cuts did not impact annual performance bonuses and stock grants. Last fall, Intel announced changes to its executive compensation structure that will make it harder for Gelsinger to earn the new hire performance-based equity awards he received when he became CEO in early 2021.

In the same memo, Gelsinger said the formula for this year's annual performance bonus has been changed and now includes "a Spend Reductions category designed to encourage spending discipline and efficiency across all levels of the company."

"This should be a critical area of focus for everyone," he wrote, with the word "everyone" bolded.

Intel EMEA President Frans Scheper Resigns After One Year

Also this week, it was announced that Frans Scheper, the president and general manager of Intel's Europe, Middle East and Africa organisation, is stepping down after a little more than a year on the job.

This is according to a separate Wednesday memo sent to employees by Intel chief commercial officer Christoph Schell that was seen by CRN.

An Intel spokesperson declined to comment on Scheper's departure.

Scheper, who also holds the role of corporate vice president in Intel's Sales, Marketing and Communications Group, is leaving Intel on March 31 for personal reasons, according to Schell. The company is expected to conduct a search for his permanent replacement.

"Frans has been a key member of SMG staff for the past year and has been instrumental in driving significant organisational changes and investment priorities in order to drive strategic growth in the region," Schell wrote in the memo.

Scheper's interim replacement will be Dermot Hargaden, an executive living in Ireland who leads sales for Intel's Programmable Solutions Group, according to Schell. Hargaden joined Intel through the company's acquisition of FPGA designer Altera in 2015.

Intel announced the appointment of Scheper as the head of the EMEA region almost exactly a year ago. The role put him in charge of the overall business in the region, which included "driving revenue growth, engaging with the local ecosystem to create new opportunities, and strengthening Intel's existing regional customer and partner relationships," according to a press release.

Scheper joined Intel shortly before the chipmaker announced a plan to invest as much as $84.8 billion (€80bn) over the next ten years in research, development and manufacturing facilities across Europe, a massive initiative that will rely heavily on government facilities.

"I am delighted to be leading Intel's growth in EMEA at such a pivotal point in the region's future. Fortunately, the European Chips Act and Digital Decade targets show that its leadership is as ready as we are to rebuild a thriving, state-of-the-art and regional semiconductor supply chain," Scheper said when he joined Intel early last year.

For Intel's planned chip manufacturing site in Germany, the chipmaker is seeking nearly €3bn more than what was already approved for government funding due to higher energy costs and new expectations that the fab will use a more advanced manufacturing node, according to an early February report by German publication Handelsblatt.

An Intel representative told the outlet at the time that it was "working with government partners to close the critical cost gap. "

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