Intel said the losses, along with other cost-cutting measures stemming from a three-month review of operations, would help save $1 billion this year, $2 billion next, and $3 billion in 2008.

Analysts have said Intel needs drastic action to reverse sliding profits and halt steady market share gains by rival Advanced Micro Devices.

Paul Otellini, Intel's chief executive, said in a statement: "These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come."

The cuts, which were at the low end of the 9,000 to 15,000 analysts expected, included 1,000 managers Intel laid off in July and workers in two business units that it sold over the past few months.

The reduction was Intel's largest in 21 years, and the biggest for a Silicon Valley company since Sun Microsystems, a maker of server computers, said in May it would sack up to 5,000 workers.

Problems

Intel spokesman, Chuck Mulloy, said most of the reductions would hit management, marketing and IT workers.

Joe Osha, a Merrill Lynch analyst, said: "The opportunities for cost reduction reside more in flash memory and non-core businesses. Intel has too many poorly focused science projects for a company with so many competitive problems.

"The areas that Intel will likely seek to address with cost cutting are not the core microprocessor businesses.

"We also think that Intel has very limited ability to cut either product development or marketing costs without imperiling the business recovery the company hopes to achieve."

On Monday, a Malaysian newspaper reported Intel would offer voluntary layoffs to up to 2,000 workers in that country, where the company has employed 10,000 people for assembly, packaging and testing.