Staff at Intel's Online Services operation are preparing to hear the worst on Friday morning, when the company is expected to announce major cuts to the division's headcount.

The scale of the reduction is not yet known, but according to an internal email sent to IOS staffers today and seen by The Register, it's going to be "substantial".

The email implies that the reductions at IOS will simply involve moving staff to other parts of the corporation - staff will be redeployed, rather than released from their duties. The move, it says, is nothing to fear: "Redeployment is not a layoff, it is a paid-for internal job search."

Then again, it goes on to say that the process may also be "coupled with outplacement services" and could involve "some separation pay if no job is located". And given the email opens with a direct reference to Intel's plan to reduce its worldwide workforce by 5000, the signs are not good.

The omens aren't much better for staffers who remain within the company. "Although some employees may not be able to find jobs for which they are qualified, many do find other positions and others find temporary assignments while continuing to look for a full time position," chirps the email.

The reason for the cuts is explained more baldly: "Despite everyone's best efforts, business conditions for IOS have not improved. Our revenue is not coming in line with our spending and we have no choice but to substantially reduce our headcount and spending in order to meet the targets set for us by the corporation."

This despite some big-name customers like the the BBC, EMI, Terra Lycos and... er... eVineyard.com.

Still, we're not entirely surprised. Intel's attempt to push into the burgeoning online services market has largely failed to deliver. Last year, its joint venture with SAP, Pandesic, folded " due to slower than anticipated market acceptance of business-to-consumer e-commerce solutions". Earlier this year, IOS shut down iCat its e-commerce and services operation targeted at small to medium-sized businesses.

Instead, IOS would focus on providing services - including the iCat software - to ASPs, and it launched a scheme in March to help its ASP customers market themselves.

Clearly it hasn't worked too well, hence the way IOS' "revenue is not coming in line with our spending".

IOS employs over 1500 staff worldwide. Here in the UK, IOS operates a 100,000sq ft server farm capable of holding 10,000 servers and employing 250 people. Whether it is or not isn't known, but it's certainly not likely to be after the meetings to be held on Friday 4 May in the US and EMEA regions at which staffers will hear what their fate is to be. ®

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