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VOL. 127 | NO. 23 | Friday, February 03, 2012

Smith & Nephew to Cut 7 Pct. of Global Workforce

By Aisling Maki

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Smith & Nephew has announced it will reduce its global workforce by 7 percent over the next three years. The statement came Thursday, Feb. 2, when the London-based company reported its fourth-quarter and full-year 2011 earnings, with Q4 earnings that exceeded analysts’ estimates.

The medical device maker’s orthopedics division is based in Memphis.

Smith & Nephew said the majority of the structural changes will impact its general and administration expenses and includes about 220 positions lost to date.

It was unknown as of press time whether the planned layoffs will affect Memphis, where the company employs about 2,000 workers.

Smith & Nephew in December cut about 80 positions in Memphis. Those cuts were the result of organizational restructuring to eliminate duplicated roles after the company’s Memphis-based Orthopaedic Reconstruction and Trauma division was combined with its Andover, Mass.-based Endoscopy division, forming the Advanced Surgical Devices Division.

Smith & Nephew reported Q4 revenue of $1.1 million compared to $1.07 million revenue in Q4 2010. The company’s 2011 full-year revenue totaled $4.27 million, compared to $3.96 million in 2010.

Q4 orthopedics revenue was flat at $586 million, compared to $584 million revenue in Q4 2010. It was particularly flat in the U.S. and down 7 percent in Europe, the company said in its earnings report. Revenue fared better in emerging markets, with a 10 percent growth in the rest of the world, such as China and India, both of which have a growing middle class.

Smith & Nephew’s December layoffs – which included employees in both its Memphis and Andover offices – were in various departments, and spokesman Andrew Burns said at the time the company is facing a challenging economic environment, regulatory environment and ongoing cost of pressure in its established market.

As part of the restructuring, Joseph DeVivo, the company’s Memphis-based president of Orthopaedic Reconstruction and Trauma, left Smith & Nephew in August. The combined division is led by Andover-based Mike Frazzette, who has served as president of the endoscopy division since 2006.

“It’s a single division with two locations, and we remain heavily invested in Memphis – there’s no change there,” Burns said at the time of the layoffs.

The company also said then that its new combined orthopedics and endoscopy management team would work to implement tighter controls over spending, which it hoped will improve its orthopedics margin.

Burns said at the time that the restructured model would also allow Smith & Nephew “to invest more in emerging markets, where there’s greater potential for growth right now.”

The orthopedics division had a rough third quarter. Though the company reported strong revenue growth for the period, CEO Olivier Bohuon released a statement saying he was “disappointed with our margin performance, with Orthopaedics overshadowing excellent performances in Endoscopy and Advanced Wound Management. We are taking the steps necessary to reduce a cost base in Orthopaedics that is too high for ongoing market conditions.”

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