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Stryker to lay off 5% of workforce

by Brendon Nafziger , DOTmed News Associate Editor
Stryker said Thursday it was laying off 5 percent of its global workforce, in a move analysts say could help soften the earnings hit from a coming medical device manufacturers tax.

The Kalamazoo, Mich.-based maker of surgical and orthopedic equipment said the layoffs were part of a restructuring move that would help shave $100 million off yearly pre-tax operating costs, starting in 2013. Stryker expects most of the layoffs and restructuring activities to be wrapped up by the end of next year. Affected employees would receive severance packages, counseling and job placement services, Stryker said.

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Reuters estimates the company will cut about 1,000 workers.

The company expects $150 million to $175 million in restructuring charges, of which it will record $85 million to $95 million in the fourth quarter.

The announcement comes as medical device makers brace themselves for a 2.3 percent excise tax, called for on the industry by the Affordable Care Act. The tax is set to take effect in 2013.

"Assuming (Stryker's) restructuring initiative can achieve management's anticipated ~$100M annual savings target starting in 2013, this could -- all else held equal -- at least partially neutralize the Med Devices Tax hit to (earnings per share)," Rick Wise, an analyst with the health care investment bank Leerink Swann, said in a note to investors Friday. Earlier, he said they estimated the company would take a nearly 23 cent EPS hit from the tax.

"These initiatives reinforce our view that (Stryker) remains one of the better positioned companies in our universe to deliver above-average EPS growth over time," Wise said.

Earlier this fall, the Advanced Medical Technology Association (AdvaMed), a trade lobby, released a study warning that the medical device tax could lead to the loss of 43,000 U.S. jobs.


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Brian Tunell

Creating Jobs

November 17, 2011 11:26

This is called "Creating Jobs the Obama way." It's proof that you can not tax your way to prosperity. It only continues to grow an already bloated and unsustainable government.

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