Citing the implementation of the medical device excise tax and a slowdown in elective procedures, Kalamazoo, MI-based Stryker ($SYK) will cut roughly 5% of its workforce and institute other restructuring activities to reduce pretax operating costs by more than $100 million beginning in 2013.
The company expects recording pre-tax restructuring charges of about $150 million to $175 million, and an anticipated $85 million to $95 million of that will be recorded in the fourth quarter of 2011.
"As our markets continue to evolve, these actions are part of our ongoing focus on quality, innovation and cost, and position the Company to continue to provide strong, consistent growth in a changing environment," said Stephen MacMillan, Stryker chairman, president and CEO, in a statement. "Against this backdrop, we are committed to achieving consistent double-digit per share earnings growth in 2011 and beyond."
In a research note, Cowen analysts say they remain encouraged by Stryker's efforts to diversify into new verticals. But the cuts may "further [validate] our negative view on the outlook for traditional orthopedics regarding structural challenges facing the industry."
MacMillan has spoken out many times against the excise tax, which he sees as injurious to his industry. "Here we are, one of the greatest industries in the country, and we're staring down on January 1st, 2013 and the addition of a 2.3 percent excise tax, while meanwhile on the other side all the discussion in Washington is about creating jobs," he said at a conference earlier this year, as quoted by Mass Device.
MacMillan expects the tab on the medical device tax at $150 million for his company, according to Mass Device.
This is not the first layoffs Stryker has announced this year. Back in May, the company said it was cutting 142 jobs at an Irish facility in Cork. The jobs were slated to be moved to China and Malaysia because of competitiveness and cost issues, the Irish Examiner reported at the time.
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