The Santa Clara, Calif.-based computer chip maker said the restructuring will help save $2 billion in expenses in 2007 and $3 billion annually in 2008 and beyond.

The move, announced late Tuesday afternoon, follows rumors of upcoming cuts that began circulating late last week.

The company said that much of the savings will come from a combination of non-workforce-related steps and a significant reduction in Intel's workforce, which stood at about 102,500 workers at the end of the second quarter of this year.

The workforce will shrink to about 95,000 by the end of this year though layoffs, attrition and previously announced actions and then will drop to about 92,000 by the middle of 2007. Intel will also cut back on merchandising expenses, capital expenses and materials.

"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," Paul Otellini, Intel's president and CEO, said in a statement.