Johnson & Johnson, a major pharmaceutical and medical device company, announced that it was reducing its workforce in its medical device unit. This particular Johnson & Johnson unit is charged with manufacturing blood glucose monitoring systems as well as sterilization equipment. In making the announcement, the company mentioned a number of factors that contributed to its decision to trim staff in its medical device unit.
A Fortune 500 company, Johnson & Johnson is traded in the New York Stock Exchange. The company maintains operations in 57 countries, with product sales in 175 countries. It’s worldwide sales top $65 billion annually.
Number of Medical Device Jobs on the Block
Johnson & Johnson advised that it was cutting about 3,000 jobs in its medical device unit. The company has offered nothing specific in regard to who in the unit would face the axe.
The cut represents a decrease in the company’s worldwide workforce and represents a 6 percent decrease in the number of workers in the medical device unit.
Primary Reason for Job Reduction
In announcing the workforce reduction in the medical device unit, Johnson and Johnson made mention of the fact that sales were down in that unit for the year. Specifically, according to the company, sales in the medical device unit are down about 2.9 percent worldwide so far in 2016.
The dip in sales is greater in the United States. So far in 2016, U.S. sales have dipped 3.4 percent.
In announcing the cut, the company made note that the decrease in workers in the medical device unit represents a realization about the changing needs and requirements of the worldwide medical device market at this juncture in time.
Overview of Medical Device Unit
The New Jersey based company engages in a number of activities within its medical device unit. These include manufacturing and sales. The unit is also involved in research and development. The company made no mention of slowing research and development in announcing the staffing cut.
The unit has been involved in bringing a number of new or redesigned devices to the market in recent years. The company indicated that the lowering of staffing levels will not impact its research and development efforts, which remain a priority at the company. In addition, the marketing and sales elements of the company are said to expect no appreciable impact from the workforce reduction.
Value of Company and Market Response
The market appeared to respond favorably to the announcement that Johnson & Johnson was cutting staff, largely in response to market demands. At the present time, Johnson & Johnson is anticipated to outperform the majority of stock that is rated by The Street Ratings Team. Johnson & Johnson has been given a strong buy rating, with a score of A-. Indeed, the buy rating has been consistently higher than that of other companies in the industry over the course of the past year.
Johnson & Johnson is viewed as strong in a number of areas, including its overall financial position. The company has a reasonable level of debt, good cash flow and its profit margins are expanding. The general belief is that these factors outweigh the dip in sales in the medical device unit. In addition, the workforce cut in that unit generally is seen as a positive response to the situation. The positive attributes enumerated about the company are not expected to change in the immediate future. Indeed, the long term prospects in relation to these issues are also positive.
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