The savings are a combination of non-workforce related steps and a "significant" reduction in Intel's workforce. The company's employee population will decline to approximately 95,000 by the end of this year, resulting from workforce reductions, attrition and previously announced actions. The workforce will decline to approximately 92,000 by the middle of 2007 -- 10,500 fewer than the company's employee population at the end of the second quarter of 2006. In addition to the savings from the workforce reduction, the company expects savings in merchandising expenses, capital and materials, says Paul Otellini, Intel president and CEO.

Most job reductions this year will occur in management, marketing and information technology functions, reductions related to the previously announced sale of businesses, and attrition. In 2007, the reductions will be more broadly based as "Intel improves labor efficiency in manufacturing, improves equipment utilization, eliminates organizational redundancies, and improves product design methods and processes," the company says.

In 2008, the company expects the cost and operating expense savings from this restructuring to grow to approximately $3 billion as it achieves the full-year run rate on the projects implemented in 2007. In addition, Intel expects to achieve a capital expenditure avoidance of $1 billion by "better utilizing manufacturing equipment and space." The company expects that approximately 25 percent of the project's savings in 2007 will reduce cost of sales, and the rest will reduce operating expenses. The company expects severance costs to total approximately $200 million, offsetting some of the expected savings from the project's implementation.