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I don't have any internal knowledge of Intel but I can make some guesses.
There is a 1 to 2 year process pipeline that goes from ideation, to design, to prototyping, to production readiness, to recurring production. If Intel has determined that the chips they have in design and prototyping stage aren't market viable, there's no reason to pass them to the next steps. This means that the teams that follow (production readiness, to recurring production) won't have work for potentially years. So why employ the extremely expensive staff that do those steps for years when they have nothing to do and you just burn money for now output?
Business have ways move moving profit and debt around. One way is corporate bonds ( or Commercial Paper). This can give cash infusions up front to build out infrastructure or finance today's design costs knowing that you'll be able to take the profits from the sales of those completed products at a later date, and pay off the debt. Its possible that Intel has taken out this debt, and because they're dumping products currently in development, they won't have any profits to pay off the debt. I don't know if Intel has any of these, but they are not uncommon in large companies.
Sure, but maybe not on all product lines. If you have 10 product lines, and 8 of them are producing products that are barely profitable (or perhaps not profitable at all), you might trim those lines, reducing your headcount to provide more R&D resources to the 2 remaining promising product lines.
Because in an industry as specialized as semiconductors, most of those "expensive staff" are people with 12 to 25 years of industry experience and company specific institutional knowledge.
Once they're gone, it's impossible to replace that knowledge. New hires will never know the same details and tricks, and the old staff are unlikely to come back after being screwed (except for insanely high compensation.) In specialized industries you have to retain the knowledge base through thin times to have any hope of being successful in thick times.
Its a shortsighted move by bean counters looking to make it to the next quarter so they can merge or sell off, and nothing more.