Intel's Job Cuts Reflect Further Decline in PC Market, But Not Its Death

— -- While more people turn to their smartphones or tablets, Intel is putting less manpower into its personal computer business, but not eliminating it.

Intel's PC sales were weaker than expected in its first quarter, fueling an 11 percent reduction in its workforce, the company said during its first quarter earnings announcement on Tuesday. The company said it will eliminate 12,000 jobs without specifying which employees would be let go.

"We are evolving from a PC company to a company that powers the cloud and billions of smart connected and computing devices," Intel CEO Brian Krzanich said in a conference call Tuesday, adding that businesses surrounding data centers and the "internet of things" are "now Intel's primary growth engines."

It's not just Intel feeling the pinch in PC sales. Worldwide PC shipments declined 11.5 percent in the first three months of this year to 60.6 million units, according to research company IDC, with Lenovo, HP, Dell and Apple all seeing a slowdown in the first quarter.

Intel is still the leader in the design and manufacturing of microprocessors found in personal computers, Abhinav Davuluri, Morningstar equity analyst pointed out.

There still are areas of growth for certain PC products, such as enterprise computers -- those high-end systems often used by businesses -- and gaming PCs, which grew at double-digit rates year-over-year, Krzanich pointed out to analysts. The company announced that its overall revenue in the first quarter was $13.7 billion, up 7 percent year-over-year.

But of Intel's revenue, 60 percent comes from areas other than the personal computer, Krzanich told analysts on Tuesday.

"It's time to make this transition and push the company over all the way to that strategy and that strategic direction," Krzanich said.

Revenue from Intel's client computing group, which is its PC and mobile chip business, grew only 2 percent from the previous year to $7.5 billion. That was below Intel's expectations due to the "weaker-than-expected" PC market, Intel CFO Stacy Smith said during Tuesday's call.

But Intel's data center group is benefiting from the growth of cloud computing.

"Mobile devices have become the preferred device to perform computing tasks and access data via cloud infrastructures that require considerable server buildouts," Davuluri wrote in a research note. "This development has provided strong tailwinds for Intel's lucrative server processor business."

But Raymond James analyst Hans Mosesmann said Intel's strategic moves are late in the tech game.

"In our view, Intel’s moves are not preemptive for innovation’s sake -- they are defensive and perhaps even last-minute in nature," Mosesmann wrote in a research note today.