Despite a solid third quarter, Boston Scientific is slashing at least 1100 positions around the world. Total layoffs could be as high as 1500. The firm announced a similar number of layoffs earlier this year.
In the past, layoffs at Boston Scientific have taken place when the company faced heavy debt, poor revenue or lagging profits. However, these latest job cuts come in financial fair weather. Instead of cutting jobs as a defensive measure, these latest layoffs put Boston Scientific on the offensive. With the cuts, Boston Scientific is trying to boost its product lineup.
If this move is causing a sense of deja vu, there's a reason: The company has had a handful of restructurings since 2009.
In its third quarter, Boston Scientific landed total sales of $1.7 billion. While the company did lose $5 million in the third quarter, this is only a fraction of the $664 million lost during the third quarter of 2012. Excluding electrophysiology and interventional cardiology, revenues grew in every one of the company’s sectors. Neuromodulation did very well, yielding a sales increase of 32%.
During a conference call, Boston Scientific CEO Michael Mahoney described third quarter financials as reflecting “strong overall results.” In response to questions over job cuts, he stated that the layoffs are part of the company’s “strategic growth initiative.” Funds saved from the latest job cuts will go towards the development of future products and other initiatives.
“Part of that is plant network optimization,” he noted. Mahoney also stated that the company will continue to “see how we lead our operations and reduce overhead.”
not share many details on the layoffs, cuts will begin starting in the fourth quarter. The restructuring initiative is expected to continue through 2014.
In total, the company hopes to reduce its existing pretax operating expenses to $200 million in the next two years. This reduction in operating expenses would be achieved by slashing $150 million in costs.
The company disclosed that this latest restructuring will lead to pretax charges of approximately $175 million to $225 million.
Despite bad news for hundreds of Boston Scientific employees, the company experienced some strong growth areas in the third quarter. In particular, the women's health and endoscopy divisions landed sales increases of 5% and 4%, respectively. In addition, sales at the company’s cardiac rhythm management division grew by 1%, reflecting the first upward trend after several quarters of less-than-perfect performance. The company’s CRM division includes pacemakers, defibrillators and other similar devices.
Some of the company’s recent gains came from new products and acquisitions. In particular, growth in BRICs and other developing regions helped boost growth.
The company also achieved another significant milestone following several years of financial struggles. Following its purchase of Guidant for $27.5 billion several years ago, the company faced several federal claims over recalled defibrillators. In recent months, the company was able to settle the last two federal claims for $30 million.
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