Tyco to cut 7,200 jobs; consolidate 219 facilities; quit +50 businesses
Pembroke, Bermuda—Tyco International Ltd. reported Nov. 4 that it’s undertaking a divestiture and restructuring program that will layoff 7,200 employees, divest more than 50 businesses, and consolidate 219 facilities.
Pembroke, Bermuda— Tyco International Ltd. reported Nov. 4 that it’s undertaking a divestiture and restructuring program that will layoff 7,200 employees, divest more than 50 businesses, and consolidate 219 facilities. Tyco’s present management say the cuts will help it focus on its core businesses, simplify operations, and improve its cost structure.
The divestiture, restructuring and other moves have resulted in pre-tax charges of $1.2 billion in 4Q03, reducing Tyco’s per share earnings to $0.49 for 4Q03. The program is being undertaken even though the company also reduced its per-share losses to $0.15 in fiscal 4Q03 from $0.72 in fiscal 4Q02.
As part of its divestiture, the company plans to sell its Tyco Global Network (TGN), which is the firm’s undersea, fiber-optic telecommunications network. Though none of the other businesses have been identified, the company reports that it’s divesting in every one of its divisions except Plastics & Adhesives. Measured by revenue, more than half the divestitures are in the firm’s Fire & Security division.
In fact, the businesses that Tyco is exiting had combined annualized revenues of $2.1 billion, with the largest having sales of less than $400 million, in fiscal 2003, or about 6% of the company’s total revenue base. Meanwhile, TGN had a pre-tax operating loss of $117 million, while the other businesses being divested had a combined operating profit of approximately $55 million 2003. Except for TGN, Tyco expects to gain at least $400 million from the divestitures, and projects the program to generate a pre-tax loss of $250 million to $450 million.
Of the 219 facilities that Tyco is consolidating, 184 are in Fire & Security, 390 are in Plastics & Adhesives, and the rest are in Tyco’s Engineered Products & Services division. Most charges associated with the restructuring will be accounted for in fiscal 2004, and will amount to about $400 million, inclusing about $280 million in cash. Total annualized savings from the restructuring are estimated at $230 million by 2005.
“Our divestiture and restructuring moves will accelerate our ability to improve our profitability, as we continue to make the transition from acquisition-focused enterprise to a high-performing operating company,” says Ed Breen, Tyco’s chairman and CEO. “Although the TGN is the world’s largest undersea, fiber-optic network, we believe consolidation is needed in this market. Since we are not prepared to invest further in this industry, we intend to exit the business. The other planned divestitures are small, non-strategic businesses that require a disproportionate amount of resources and management attention.”
Control Engineering Daily News Desk
Jim Montague, news editor