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Intel, IBM send mixed signals to India
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July 05, 2006

IBM announced it will be investing $6 billion in India -- three times the revenue of an Infosys [Get Quote] or a Wipro [Get Quote] -- over the next three years. The joke doing the rounds is that the 'I' in IBM now stands for 'India'.

On the other hand, Intel in India will reportedly downsize its total staff of 3,000 to 1,500-2000 starting third week of July. Sun is following suit with a global job cut of 5,000 and Seagate is globally downsizing up to 6,000 jobs. As both these firms have substantial operations in India, the Indian headcounts are bound to be affected.

Apple tripped at the very entrance, developing cold feet even as it got started on setting up its technical support centre in India. The company, after hiring a small number of the planned 3,000 staff, shut down its centre in Bangalore stating they did a rethink.

Are these developments a cause for concern? Says Madan Padaki, co-founder and director, MeritTrac, a talent management firm: "It is part and parcel of a growing economy. As industries grow, this is being done as an internal prescription. There is no systemic problem. Even as many firms may be retrenching, many many more are hiring."

Another industry observer saw a pattern in the downsizing by Intel, Sun and Seagate. All are in hardware and have an exposure to microprocessors or their environments.

Hardware firms are not set to enter anything like the downslide that took place in 2000 in the tech world as a whole but some of them are clearly in for a bout of restructuring and painful attempt to rediscover their orientation. And as India is now central to the global technology effort, the ripples are bound to reach it.

Only Intel -- which terms the downsizing as an 'Efficiency Programme" -- was available for comments. G B Kumar, director-marketing (South Asia), Intel, explains: "On a global basis, each and every division and business unit is under the scanner and working out how each one of us will figure in the new vision which Intel is pursuing."

"The entire business will undergo change and restructure. Somewhere, we will have to bite the bullet and non-core businesses have to be done away with," says Kumar.

Said an industry analyst: "This is an effort which any global corporation will undertake from time to time. The same happened when Intel morphed from a memory player to a processor player. The only difference is that this entire exercise is coming under greater scrutiny this time around and is getting a lot of attention. Companies go through this kind of exercise all the time."

But what about the layoffs in Intel because of the morphing? "We have to be leaner and meaner. However, we do not know what will be the result of this exercise we are pursuing. We are in the final stages of the 90-day evaluation exercise and we intend to finish this up during July," Kumar says.

He, however, adds that "the Intel India Development Centre is hiring aggressively and constantly looking out for people. The India centre will play a critical role as the corporation evolves and we are executing the $750 million expansion plan which Craig Barrert announced for India."

For the record, though, the spokesperson said they have put on hold hiring of non-critical staff. "We are questioning each and every division in the company. The Mobility, Server, Desktop, Healthcare, E-business and Small & Medium Groups are all being examined. Lets see what is the outcome of this exercise," notes Kumar.

According to Intel, they will try to re-deploy most of their staff in this exercise and only if they really do not fit any of the profiles, the employee leaves the company with a severance package.

One key factor, which is forcing Intel to carry out this 'exercise' might also be the fact that its rival AMD is fast catching up. "AMD is getting strong in the Indian market, especially in the government segment. It has also announced cheaper priced products.

As Intel thinks about its emerging markets strategy - 'World Ahead' - for computing to reach the rural communities, this efficiency exercise might be to take on AMD in the low-end market," added an analyst.

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