SAN FRANCISCO – Intel Corp. said late Tuesday it will cut 10,500 jobs, or about 10 percent of its work force, by the middle of 2007 as the world’s No. 1 maker of computer chips looks to slash costs and boost profitability.

Intel said in a statement the cuts will save $2 billion in costs and operating expenses in 2007 and that the annual savings will reach $3 billion in 2008. In addition, Intel expects to reduce its capital spending by $1 billion. The cuts are part of a plan unveiled by Chief Executive Paul Otellini in April to refocus the company on its core businesses.

“These actions, while difficult, are essential to Intel becoming a more agile and efficient company,” Otellini said in a statement after the close of U.S. markets Tuesday.

In late July, Intel posted its lowest sales and profit figures since 2004 and issued a weaker-than-expected forecast for the current quarter.

Intel has seen increased competition from its longtime rival, Advanced Micro Devices Inc., which has taken share from Intel in the key market for chips that run corporate servers. Santa Clara, Calif.-based Intel’s profits have been hurt by losses in businesses that are peripheral to its main focus on making chips for desktop personal computers, laptops and servers.

“Intel has too many poorly focused science projects for a company with so many competitive problems,” Merrill Lynch analyst Joseph Osha wrote in a note to clients on Tuesday before the cuts were announced.

Osha estimated that if Intel divested its flash-memory unit and other non-core businesses, the company could post 2007 earnings of $1.37 a share on sales of $36.2 billion, compared with his current estimate for earnings of $1.22 a share on $39.4 billion in revenue.

Intel said its work force will be reduced to 92,000 by the middle of next year, 10,500 fewer than the number of employees it had at the end of the second quarter of this year.

Intel shares were little changed following the announcement.