Fortune Editors Extortion

Intel headquarters in Santa Clara, Calif. (Photo: Andrej Sokolow/picture alliance/Getty Images)

Intel is reportedly preparing to cut one-fifth of its more than 100,000 employees.

CEO Lip-Bu Tan is maneuvering to “streamline management and rebuild an engineering-driven culture,” according to a Bloomberg report. The alleged cut would follow last year’s layoff of about 15,000 workers.

Unsurprisingly, Intel shares rose some 7% on the news, to about $20.

The turnaround story continues for one of Silicon Valley’s iconic corporations, which has suffered three years of sales declines and perpetual change in the corner office.

Tan, who on Thursday will preside over his first quarterly earnings report as CEO, previously promised to reinforce the company’s core businesses and spin off the rest. 

(The company recently agreed to sell a majority stake in its programmable chips unit Altera to Silver Lake Management.)

The question is what’s considered core. Critics of the company have been split over whether Intel should be broken up or preserved intact; Tan, who has not directly addressed the subject thus far, seems to be walking a moderate path. 

Intel employs more people than any other company in the PHLX Semiconductor Index, according to S&P Global Market Intelligence, and its annual revenue per employee lags peers.

But you can’t cut your way to greatness. We’ll see what he has to say on Thursday. —AN

The European Union on Wednesday fined Apple and Meta for allegedly breaching the Digital Markets Act.

The bill? About $570 million (€500m) for the iPhone maker and about $227 million (€200m) for the Facebook parent—one-hundredth the maximum allowed under the 2022 law.

The EU’s executive body, the European Commission, also issued cease-and-desist orders that are arguably a bigger deal than the fines because they target key revenue streams for each company.

“Due to a number of restrictions imposed by Apple, app developers cannot fully benefit from the advantages of alternative distribution channels outside the App Store,” the commission said in a statement.

Meanwhile, Meta’s ad model, which offers a binary choice between free personalized ads based on user data or paid exemption from ads, did not offer a choice that allows ads without relying on use of personal data, the commission said.

Both companies said they would appeal. 

Apple said the sanctions “are bad for the privacy and security of our users, bad for products, and force us to give away our technology for free.” 

Meta told the Wall Street Journal that the penalties amount to “a multibillion-dollar tariff on Meta while requiring us to offer an inferior service.”

The decisions come as trade tensions between the U.S. and EU escalate. Reacting to the decision, the White House said Wednesday that the fines were a "novel form of economic extortion” for the American tech companies. —AN

IBM reported better-than-expected quarterly earnings and revenue on Wednesday.

For the first quarter, Big Blue reported earnings of $1.60 on revenues of $14.54 billion. Wall Street was looking for earnings of $1.40 on revenues of $14.4 billion.

But it was management’s perspective on the Trump administration that left an impression.

“We appreciate the administration’s focus on economic growth and rational regulation, which will strengthen the US competitive position,” IBM CEO Arvind Krishna said on a call with investors. “We believe this will result in long-term value creation and make it easier for technology to contribute to economic growth.”

IBM has managed to outperform peers this year amid the brewing global trade war. Less than 5% of IBM spending goes to goods imported to the U.S., CFO Jim Kavanaugh said on the call. 

But it’s not all sunshine and rainbows. Though buying behavior hasn’t yet materially changed, “uncertainty may cause clients to pause and take a wait-and-see approach,” Krishna said.

Besides, the U.S. efficiency initiative known as DOGE has delayed or canceled 15 of IBM’s federal contracts, Kavanaugh said. (Though less than 10% of IBM’s consulting business is for the federal government, and most of it is critical, not discretionary, Krishna added.)

“There are areas of our portfolio,” Kavanaugh said, “that could see greater variability in the event that the macroeconomic environment deteriorates.” —AN