Intel will eliminate as many as 12,000 jobs—11 percent of its global workforce—by mid-2017 as the chipmaker accelerates a shift away from the shrinking personal-computer market toward data centers, cloud computing and connected devices.

The restructuring announced Tuesday will combine voluntary departures, layoffs and the consolidation of facilities. Intel expects to record a $1.2 billion charge in the second quarter, save about $750 million this year and reduce annual costs by roughly $1.4 billion once the program is complete.

Reuters reported that the cuts affect a company whose processors have powered the personal-computer industry for decades. The decision acknowledges that the market at the center of Intel’s identity can no longer supply reliable growth.

The PC contraction becomes structural

Worldwide PC shipments fell 9.6 percent in the first quarter, the sixth consecutive quarterly decline, according to a Gartner estimate. Consumers are replacing computers less frequently as smartphones and tablets handle more everyday tasks, while currency weakness has raised prices in several markets.

Intel’s Client Computing Group remains its largest source of revenue, but the economics are changing. Unit volumes are under pressure, lower-priced devices reduce the value of each processor sale and Microsoft’s Windows 10 introduction has not produced a broad replacement cycle.

The company’s first-quarter results showed $13.7 billion in revenue and highlighted stronger growth in data-center, memory and Internet-connected businesses. Those operations are not yet large enough to erase dependence on PCs, but they offer higher growth and strategic leverage.

A Wired account noted that data centers and connected-device businesses generated about 40 percent of Intel’s revenue and most of its operating profit growth last year. Management is restructuring the company around those engines.

From processor supplier to cloud infrastructure

Intel’s strongest position outside PCs is in server processors. Cloud providers, enterprises and telecommunications companies need increasingly powerful chips to process online services, analytics and machine-learning workloads. Data-center products typically command higher margins and face fewer direct competitors than consumer processors.

The company also is investing in nonvolatile memory, field-programmable chips acquired through its purchase of Altera, and components for connected vehicles, factories and household devices. Each expands the market beyond the central processor inside a laptop or desktop.

Chief Executive Brian Krzanich told employees that Intel must become a company that powers the cloud and billions of smart, connected computing devices. A contemporary summary described the plan as a transition toward enterprise infrastructure and the Internet of Things.

The strategy carries risk. Connected-device markets are fragmented, memory manufacturing is capital-intensive and cloud customers increasingly design components suited to their own workloads. Intel must protect its manufacturing and performance advantages while entering businesses with different competitors and purchasing cycles.

Restructuring reaches people and places

Most affected employees will learn their status within 60 days, though some reductions will continue into 2017. The company has not provided a detailed geographic breakdown. Site consolidation suggests entire facilities or functions may be combined rather than cuts spread evenly.

The 11 percent reduction is unusually large for Intel and signals that management does not view the PC decline as a temporary inventory correction. A report on the savings targets placed the $1.4 billion annual reduction against investments required in data centers and connected devices.

Intel also said longtime finance chief Stacy Smith will move to lead sales, manufacturing and operations after a successor is appointed. The management shift binds manufacturing decisions more closely to the businesses expected to drive growth.

A transition measured in revenue mix

Cost reductions can protect profits during a declining market, but the restructuring will be judged by whether new businesses expand faster than PCs contract. Server demand can fluctuate with capital spending, and Internet-of-Things revenue begins from a smaller base.

Competitors are also advancing. ARM-based designs dominate smartphones and many connected devices, while Nvidia’s graphics processors are gaining importance in artificial intelligence. Intel’s mobile investments have struggled to reproduce its PC dominance.

IDC’s first-quarter PC estimate similarly documented a steep shipment decline, reinforcing that Intel’s response addresses an industry-wide change rather than a single weak quarter.

The company retains formidable advantages: leading fabrication technology, deep relationships with computer manufacturers and control of the dominant server architecture. But Tuesday’s announcement makes the strategic wager explicit. Intel is reducing the workforce built for the personal-computer era to finance a future in which computing is distributed across clouds, data centers and billions of connected objects.