Boston Scientific Corp. to cut 1,000 jobs, close some plants

Angioplasty-device maker blames rise in competition

Manufacturing

July 13, 2000|By BLOOMBERG NEWS

NATICK, Mass. - Boston Scientific Corp. said yesterday that it will cut 1,000 jobs, or about 7.7 percent of its work force, and close plants to improve productivity and reduce costs amid increasing competition for its angioplasty products.

The company will cease manufacturing in Plymouth, Minn.; Redmond, Wash.; and Watertown, Mass. Production from those plants, along with 900 jobs, will be transferred to facilities in Miami and in Ireland.

The company said it will take a $45 million charge, or about 10 cents a share, against this year's earnings to pay for the changes. The company was expected to earn $1.15 a share this year, the average estimate of analysts polled by First Call/Thomson Financial. It had net income of $372 million, or 90 cents, last year.

Boston Scientific is trying to become more efficient and channel more resources to research so it can introduce products quickly as rivals such as Guidant Corp. and Medtronic Inc. cut into its sales.

"Improving manufacturing efficiencies ... has been a high priority for them," said Wade King, a Robertson Stephens analyst with a "buy" rating on the stock. "They are obviously taking the bull by the horns and acting."

The company makes stents, tiny metal mesh tubes used to hold arteries open after angioplasty to clear clogged blood vessels in the heart, and other medical devices.

Boston Scientific said the job cuts, plant closings and other changes will result in savings of $70 million next year, $145 million in 2002 and $180 million annually later. The savings will be invested in new products.

The company will have about 12,000 employees after the cuts.

"We have the potential to save a lot of money here, and we want to redirect at least a portion of it to research and development," Chief Executive Officer James Tobin said. "No one likes disturbing 1,900 people's lives. ... But we have to do it to create the ability to drive the top line for those that remain."

"These are exactly the operating changes that people expected from Jim Tobin," said Sandra Hollenhorst, a Prudential Vector Healthcare Group analyst with a "hold" rating on the stock. "It will clearly have a significant improvement on the bottom line for 2002 and 2003."

Tobin, former chief executive of biotechnology company Biogen Inc., was hired to lead Boston Scientific in 1999. The company had been struggling with a product recall, a U.S. Department of Justice investigation and accounting problems in a Japanese unit.

The shares rose $2.1875 to $26 yesterday. They have fallen 45 percent in the past year.

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