- Summary: Reacting to increased competition from AMD (AMD), Intel (INTC) yesterday announced cutbacks both in headcount and capital spending. Aside from reducing capital expenditures by $1 billion, Intel expects that the elimination of 10,500 jobs (about 10% of its work force) will result in annual savings of $3 billion. This will help with Intel's current price war with AMD, which is compressing margins on its flagship microprocessors. Analysts expect more non-core business to go on the auction block - most notably, its flash memory business, which lost $149 million in the second quarter.
- Comment on related stocks/ETFs: While Intel and AMD might be good investments in the long run, the short term could get nasty. AMD is making inroads in PCs, and Intel scored a coup by snagging Apple. All this competition will mainly benefit the consumer. As chip speed becomes less relevant (software has not kept up with hardware advances), look for reduced power consumption to become a key selling point. This is important for both portable device battery life and the increasing power requirements of server farms (which can consist of over 100,000 computers).
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