Intel says it can generate savings of about $5 billion over the next two years through a restructuring announced Tuesday that will include the elimination of about 10,500 jobs.

The job cuts come as Intel struggles to invigorate revenues that have declined in recent quarters as it and microprocessor rival Advanced Micro Devices have engage in a price war. The restructuring also includes Intel's decision to divest major portions of its communications business, an effort that included billions of investment over the past decade that yielded limited return.

"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," said Paul Otellini, Intel president and chief executive, in a statement.

According to Intel, the company's workforce will decline to about 95,000 employees by the end of this year, and to 92,000 by the middle of 2007. Intel expects to generate savings in costs and operating expenses of about $2 billion in 2007, and $3 billion annually beginning in 2008.

The restructuring comes following a summer in which Intel has overhauled virtually its entire processor portfolio, introducing new designs based on its next-generation Core architecture that puts Intel in a much better performance and performance per watt position in its fight against AMD. It also introduced the first dual-core versions of its high-end Itanium processor.

According to Mercury Research, AMD has increased its share of the x86 microprocessor market from 16.2% in the second quarter of 2005, to 21.6% in the second quarter of 2006. Intel has seen its share drop from 82.2% in the second quarter of 2005 to 72.9% in the second quarter of 2006.